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Date Submitted: 10/26/2014 09:02 AM
APPENDIX E
Time Value of Money SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE E-1 (a) Interest = p X i X n I = $9,000 X .05 X 12 years I = $5,400 Accumulated amount = $9,000 + $5,400 = $14,400 (b) Future value factor for 12 periods at 5% is 1.79586 (from Table 1) Accumulated amount = $9,000 X 1.79586 = $16,162.74
BRIEF EXERCISE E-2 (1) Case A Case B 5% 6% 3 periods 8 periods (2) Case A Case B 3% 4% 8 periods 12 periods
BRIEF EXERCISE E-3 FV = p X FV of 1 factor = $8,400 X 1.60103 = $13,448.65
BRIEF EXERCISE E-4 FV of an annuity of 1 = p X FV of an annuity factor = $60,000 X 16.86994 = $1,012,196.40
Copyright © 2013 John Wiley & Sons, Inc.
Weygandt Financial, IFRS, 2/e, Solution’s Manual
(For Instructor Use Only)
E-1
BRIEF EXERCISE E-5 FV = p X FV of 1 factor + (p X FV of an annuity factor) = ($5,000 X 2.40662) + ($1,000 X 28.13238) = $12,033.10 + $28,132.38 = $40,165.48
BRIEF EXERCISE E-6 FV = p X FV of 1 factor = $35,000 X 1.46933 = $51,426.55
BRIEF EXERCISE E-7 (a) 12% 8% 3% 10% 10% 4% (b) 7 periods 11 periods 16 periods 20 periods 7 periods 10 periods
(1) CASE A CASE B CASE C (2) CASE A CASE B CASE C
BRIEF EXERCISE E-8 (a) ? 0 1 2 3 4 5 6 7 8 i = 10% $25,000 9
Discount rate from Table 3 is .42410 (9 periods at 10%). Present value of $25,000 to be received in 9 years discounted at 10% is therefore $10,602.50 ($25,000 X .42410).
E-2
Copyright © 2013 John Wiley & Sons, Inc.
Weygandt Financial, IFRS, 2/e, Solution’s Manual
(For Instructor Use Only)
BRIEF EXERCISE E-8 (Continued) (b)
?
i = 9%
$25,000 $25,000 $25,000 $25,000 $25,000 $25,000
0
1
2
3
4
5
6
Discount rate from Table 4 is 4.48592 (6 periods at 9%). Present value of 6 payments of $25,000 each discounted at 9% is therefore $112,148.00 ($25,000 X 4.48592). BRIEF EXERCISE E-9 i = 8%
? $750,000
0
1
2
3
4
5
6
Discount rate from Table 3 is .63017 (6 periods at 8%). Present value of $750,000 to be received...