Professional Documents
Culture Documents
10
1.
6
15
24
(a) 12%
(b) 10%
(c) 4%
2.
(a) 8%
(b) 10%
(c) 6%
20
5
8
15
i = 8%
?
$30,000
0
20
(b)
i = 9%
?
$30,000
$30,000
$30,000
$30,000
$30,000
$30,000
30
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
C-1
?
0
Discount rate from Table 1 is .62092 (5 periods at 10%). Present value of $600,000 to
be received in 5 years discounted at 10% is therefore $372,552 ($600,000 X .62092).
Ramirez Company should therefore invest $372,552 to have $600,000 in five
years.
10
$700,000
0
15
Discount rate from Table 1 is .50187 (8 periods at 9%). Present value of $700,000 to be
received in 8 years discounted at 9% is therefore $351,309 ($700,000 X .50187). LaRussa
Company should invest $351,309 to have $700,000 in eight years.
20
?
0
25
Discount rate from Table 1 is .68301 (4 periods at 10%). Present value of $36,000 to
be received in 4 years discounted at 10% is therefore $24,588.36 ($36,000 X .68301).
Polley should receive $24,588.36 upon the sale of the note.
C-2
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
10
$60,000
1
Discount rate from Table 1 is .79383 (3 periods at 8%). Present value of $60,000 to
be received in 3 years discounted at 8% is therefore $47,629.80 ($60,000 X .79383).
Marichal Company should receive $47,629.80 upon issuance of the zero-interest
bearing note.
15
?
$40,000 $40,000
14
15
20
Discount rate from Table 2 is 9.71225. Present value of 15 payments of $40,000 each
discounted at 6% is therefore $388,490 ($40,000 X 9.71225). Colaw Company should
pay $388,490 for this annuity contract.
25
30
$100,000
$100,000
$100,000
$100,000
Discount rate from Table 2 is 3.10245. Present value of 4 payments of $100,000 each
discounted at 11% is therefore $310,245 ($100,000 X 3.10245). Sauder Enterprises
invested $310,245 to earn $100,000 per year for four years.
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
C-3
$200,000
Diagra
m
for
Princip
al
19
20
i = 4%
10
$10,000 $10,000
Diagra
m
for
Interest
15
20
19
20
$91,278.00
135,903.30
$227,181.30
30
The bonds will sell at face value or $200,000. This may be proven as follows:
Present value of principal to be received at maturity:
$200,000 X .37689 (PV of $1 due in 20 periods
at 5% from Table 1)......................................................................
Present value of interest to be received periodically
over the term of the bonds: $10,000 X 12.46221
(PV of $1 due each period for 20 periods at 5%
from Table 2).................................................................................
Present value of bonds..........................................................................
$75,378*
124,622*
$200,000*
35
*Rounded.
C-4
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
C-5
$75,000
Diagra
m
for
Princip
al
i = 9%
10
$6,000
$6,000
$6,000
$6,000
$6,000
$6,000
Diagra
m
for
Interest
15
20
C-6
$44,720.25
26,915.52
$71,635.77
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
$1,000,000
Diagra
m
for
Princip
al
14
15
16
i = 5%
?
Diagra
m
for
Interest
10
15
14
15
16
$458,110
433,511
$891,621
20
30
Discount rate from Table 2 is 5.14612. Present value of 8 payments of $2,800 each
discounted at 11% is therefore $14,409.14 ($2,800 X 5.14612). Ricky Cleland should
not purchase the tire retreading machine because the present value of the future
cash
flows
is
less
than
the
purchase
price
of
the
retreading machine.
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
C-7
10
$78,978
$78,978
$78,978
$78,978
$78,978
$78,978
11
12
Discount rate from Table 2 is 8.86325. Present value of 12 payments of $78,978 each
discounted at 5% is therefore $700.001.75 ($78,978 X 8.86325). Martinez Company
should receive $700,001.75 from the issuance of the note.
15
20
25
30
$30,000
$40,000
$60,000
3
To determine the present value of the future cash flows, discount the future cash
flows at 12%, using Table 1.
Year 1 ($30,000 X .89286) =
Year 2 ($40,000 X .79719) =
Year 3 ($60,000 X .71178) =
Present value of future cash flows
$ 26,785.80
31,887.60
42,706.80
$101,380.20
To achieve a minimum rate of return of 12%, Durler Company should pay no more
than $101,380.20. If Durler pays less than $101,380.20 its rate of return will be
greater than 12%.
C-8
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
$10,000
14
15
The .2745 for 15 periods is found in the 9% column. Carla Garcia will receive a 9%
return.
i = 10%
$51,316
$100,000
n=?
20
25
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
C-9
$1,000 $1,000
19
20
$11,469.92
n = 20
10
15
$1,000
$1,000
$1,000
$1,000
$1,000
$1,000
$8,559.48
n=?
25
30
C-10
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)
(a)
(b)
(c)
(d)
(a)
(b)
(c)
(d)
15
30
(a)
(b)
(c)
35
40
C-11
(a)
$40,000 X .62741 =
2,000 X 6.20979 =
$25,096
12,420
$37,516
(b)
$40,000 X .73069 =
2,000 X 6.73274 =
$29,228
13,465
$42,693
15
25
(a)
$90,000 X .55684 =
4,050 X 8.86325 =
$50,116
35,896
$86,012
(b)
$90,000 X .62460 =
4,050 X 9.38507 =
$56,214
38,010
$94,224
C-12
Copyright 2009 John Wiley & Sons, Inc.Weygandt, Accounting Principles, 9/e, Solutions Manual(For Instructor Use Only)