Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
Appendix B
Time Value of Money
QUICK STUDIES
Quick Study B-1 (10 minutes)
1.
12%
n = 2 periods
2.
n = 4 periods
3.
n = 8 periods
n = 24 periods
Quick Study B-2 (10 minutes)
In Table B.1, where n = 15 and p = $2,745/$10,000 = 0.2745, the i = 9%.
Quick Study B-3 (10 minutes)
In Table B.1, where i = 6% and p = $6,651/$10,000 = 0.6651, the n = 7.
Quick Study B-4 (10 minutes)
Quick Study B-5 (10 minutes)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
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Quick Study B-6 (10 minutes)
Quick Study B-7 (10 minutes)
In Table B.4, where n = 30 and i = 10%, the f = 164.494.
EXERCISES
Exercise B-1 (15 minutes)
In Table B.1, where n = 6 and i = 10%, the p = 0.5645.
Exercise B-2 (15 minutes)
Exercise B-3 (10 minutes)
In Table B.2, where i = 12% and f = $96,463/$10,000 = 9.6463, the n = 20
Exercise B-4 (10 minutes)
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
Exercise B-5 (15 minutes)
10 years x 4 quarters = 40 interest periods
Exercise B-6 (15 minutes)
Exercise B-7 (10 minutes)
In Table B.3, where n = 8 and p = $57,466/$10,000 = 5.7466, the i = 8%
Exercise B-8 (10 minutes)
Exercise B-9 (10 minutes)
Interest rate per period = 12% annual / 12 months per year = 1% per month
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
Exercise B-10 (25 minutes)
1.
First Annuity
Future
Payment
Number of
Periods
Interest
Rate
Table B.1
Value
Amount
Borrowed
First payment ……
$5,000
1
6%
0.9434
$ 4,717
Third payment …..
3
0.8396
Fourth payment …
4
0.7921
Fifth payment ……
5
0.7473
Second Annuity
Future
Payment
Number of
Periods
Interest
Rate
Table B.1
Value
Amount
Borrowed
First payment ……
$7,500
1
6%
0.9434
$ 7,076
2
0.8900
Fourth payment …
4
0.7921
2.
First Annuity
Payment size …………………………..
$ 5,000
Number of payments ……………….
6
Interest rate …………………………….
Present value of the annuity …….
$24,587
Payment size …………………………..
$ 7,500
Number of payments ……………….
4
Interest rate …………………………….
Present value of the annuity …….
$25,988
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
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Exercise B-11 (30 minutes)
1. Present value of the annuity
Payment size …………………………..
$13,000
Number of payments ……………….
Interest rate …………………………….
Value from Table B.3 ……………….
Present value of the annuity …….
$47,189
2. Present value of the annuity
Payment size …………………………..
$13,000
Number of payments ……………….
Interest rate …………………………….
Value from Table B.3 ……………….
Present value of the annuity …….
$45,046
3. Present value of the annuity
Payment size …………………………..
$13,000
Number of payments ……………….
Interest rate …………………………….
Value from Table B.3 ……………….
Present value of the annuity …….
$43,057
0.3083 x $500,000 =
17.2920 x $ 25,000 =
Exercise B-12 (15 minutes)
Semiannual interest payment = $500,000 x 10% x 1/2 = $25,000
Using Table B.1, where n = 30 and i = 4%, the p = 0.3083 (Principal payment)
Exercise B-13 (15 minutes)
1. $90,000 x 0.6651 (using Table B.1, i = 6%, n = 7) = $59,859.
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
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Exercise B-14 (10 minutes)
In Table B.4, where n = 40 and f = $154,762/$1,000 = 154.762, the i = 6%
Exercise B-15 (10 minutes)
Exercise B-16 (15 minutes)
12% annual / 12 months per year = 1% per month
Exercise B-17 (15 minutes)
10 years x 4 quarters per year = 40 total quarters
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
Exercise B-18 (10 minutes)
a. p = present value of $60,000 at 9% for 4 years
p = $60,000 x 0.7084
p = $42,504
c. There are at least two ways to solve this problem. (1) We can take the
$463 today, compute its future value, and then compare it to the future
value amount of $1,000. (2) We can discount the $1,000 back to the
d. f = future value of $90 at 5% for 8 years
Formula: $90 = f x 0.6768; then solve for f
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
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Exercise B-18 (concluded)
f. There are two aspects to this problem: a present value of a lump sum
part and a present value of an annuity part.
Part 1: p = present value of $10,000 at 6% for 10 years
g. p = present value of $500,000 at 6% for 20 years
Wild and Shaw Financial and Managerial Accounting 9e Solutions Manual: Appendix B
Exercise B-19 (20 minutes)
a. (1) Present Value of a single amount.
(2) Multiply $10,000 by p from Table B.1.
b. (1) Future Value of an Annuity.
(2) Divide $10,000 by f from Table B.4.
c. (1) Future Value of an Annuity.
(2) Multiply $4,000 by f from Table B.4.
(3) Use Table B.4, periods = 40 and interest = 8%.