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please help I have exam after a few hrs. 1....

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please help I have exam after a few hrs. 1. Compute the present value of the following single amounts to be received at the end of the specified period at the given interest rate. Invested Interest Number of Item Amount Rate Periods (a.) $40,000 7% 20 (b.) $20,000 6% 25 (c.) $50,000 11% 10 2. . Incognito Company is contemplating the purchase of a machine that provides it with net after-tax cash savings of $80,000 per year for 5 years. Interest is 8%. Assume the cash savings occur at the end of each year. Required: Calculate the present value of the cash savings. Answer: PVA = $80,000 x 3.99271 = $319,417 3. Touche Manufacturing is considering a rearrangement of its manufacturing operations. A consultant estimates that the rearrangement should result in after-tax cash savings of $6,000 the first year, $10,000 for the next two years, and $12,000 for the next two years. Interest is at 12%. Assume cash flows occur at the end of the year. Required: Calculate the total present value of the cash flows. Answer: PV OF FUTURE VARIABLE CASH FLOWS Year Cash Flow PV Present Value 1 $ 6,000 .89286 $ 5,357 2 10,000 .79719 7,972 3 10,000 .71178 7,118 4 12,000 .63552 7,626 5 12,000 .56743 6,809 $34,882 TOTAL PV OF CASH SAVINGS 4. MBI Company's largest computer has a cash selling price of $200,000. A customer wishes to buy the computer on a lease purchase plan over five years, with the first payment to be made at the inception of the lease. Interest is at 10%. Required: (a.) Compute the amount of the annual lease payment and the gross amount due under the lease. (b.) Compute the amount of interest income earned by MBI for the first year of the lease. Answer: (a.) Annual lease payment = $200,000 / 4.16987* = $47,963 *(PVAD: n = 5; i =10%) Gross amount due = $47,963 x 5 years = $239,815 (b.) Principal amount $200,000 Payment on signing lease 47,963 Unpaid balance 152,037 Interest rate 10% Interest income first year of lease $ 15,204

 

Paper#4615 | Written in 18-Jul-2015

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