Student Name:

Class:
Problem 06-05

CLAUSSEN PURCHASE
Estimated Cash Flows

Yearly Time Interest

Cash Flow Period Rate *Factor PVA PV
Years 1-5 $ 70,000 5
Years 6-10 70,000 5
5
Years 11-20 70,000 10
5
5
End of Year 20 400,000 10

Maximum Purchase Price

* Use the Present and Future Value Tables in the text

or enter the proper formula rounded to 5 decimal places
Given Data P06-05:

CLAUSSEN PURCHASE

Anticipated cash flows per year for 20 years $ 70,000

Selling price in 20 years $ 400,000
Desired rate of return:
Years 1-5 8%
Years 6-10 10%
Years 11-20 12%
 Student Name:
Class:
Problem 06-06

Part 1:
JOHN JAMISON

= *
PV of $1 factor =

*Present value of $1: n=?, i=8% (from Table 2, n=approximately years)

Part 2:
JASMINE TEA COMPANY

= *
Annuity factor =

Present value of an ordinary annuity of $1: n=5, i=? (from Table 4, i = approximately

Part 3:
SAM ROBINSON

= = Payment
Annuity amount =
*

Present value of an ordinary annuity of $1: n=10, i=9% (from Table 4)

%)
Given Data P06-06:

Part 1:
JOHN JAMISON

Amount needed to accumulate $ 60,000

Amount invested today $ 30,000
Desired rate of return:
Annually compounded interest 8%

Part 2:
JASMINE TEA COMPANY
Amount paid for merchandise $ 28,700
Required annual payments $ 7,000
Number of payments required 5

Part 3:
SAM ROBINSON
Amount borrowed $ 10,000
Number of installments 10
Annual rate 9%
 Student Name:
Class:
Problem 06-07

THE LOWLIFE COMPANY

Calculations

Time Interest Annuity Annuity

PVA Period Rate *Factor Amount Calculation
Part 1 $ 250,000 4 10% Payment
Part 2 $ 250,000 5 8% Payment
Part 3 $ 250,000 10% $ 51,351 Payments
Part 4 $ 250,000 3 $ 104,087 Interest

* Use the Present and Future Value Tables in the text

or enter the proper formula rounded to 5 decimal places
Given Data P06-07:

LOWLIFE COMPANY

Amount of loan $ 250,000

Part 1:
Interest rate 10%
Number of payments 4
Part 2:
Interest rate 8%
Number of payments 5
Part 3:
Interest rate 10%
Annual payment amount $ 51,351
Part 4:
Number of payments 3
Annual payment amount $ 104,087
 Student Name:
Class:
Problem 06-14

HORIZON DISTRIBUTING COMPANY

Pension Obligations
as of December 31, 2011

Requirement 1:
Date of *Deferred PV of
Annual First Time Interest Annuity Pension
Employee Payment Payment Periods Rate Factor Obligations
Tinkers $ 20,000 12/31/2014 17 2 11%
Evers $ 25,000 12/31/2015 18 3 11%
Chance $ 30,000 12/31/2016 19 4 11%

* Use the Present and Future Value Tables in the text

or enter the proper formula rounded to 5 decimal places

Pension Obligations as of
December 31, 2014
Requirement 2:
PV *FV FV
as of Time Interest Annuity as of
Employee 12/31/2011 Period Rate Factor 12/31/2014
Tinkers 3 11%
Evers 3 11%
Chance 3 11%
Total present value

Amount of annual contribution: 3 11%

* Use the Present and Future Value Tables in the text

or enter the proper formula rounded to 5 decimal places
Given Data P06-14:

HORIZON DISTRIBUTING COMPANY

Life expectancy beyond retirement 15

Interest rate 11%
Number of equal contributions 3

Date of
Annual First
Employee Payment Payment
Tinkers $ 20,000 12/31/2016
Evers $ 25,000 12/31/2017
Chance $ 30,000 12/31/2018