FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 26: Present and Future Values in Accounting

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Short Answer

Review LaterAdd Note

Review Later

Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of each of the next five years. This transaction includes interest at 9%, compounded annually. What is the value of the machine today?

Correct Answer

verified

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

An interest rate is also called a discount rate.

A) True
B) False

Correct Answer

verified

Show Answer

Question 23

Short Answer

Review LaterAdd Note

A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years?

A company has $50,000 today to invest in a fund that will earn 7%. How much will the fund contain at the end of 8 years?

Explain the concept of the present value of an annuity.

A company needs to have $200,000 in 4 years, and will create a fund to insure that the $200,000 will be available. If it can earn a 7% return compounded annually, how much must the company invest in the fund today to equal the $200,000 at the end of 4 years?

A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each. How much is the company able to borrow if the interest rate is 10% compounded semiannually?

Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest rate on the loan is 5%, compounded annually. How much did Jackson borrow today? (^{PV of $1}, ^{FV of $1}, ^{PVA of $1}, and ^{FVA of $1}) (Use appropriate factor(s) from the tables provided.)

The number of periods in a future value calculation may only be expressed in years.

In a present value or future value table, the length of one time period may be interpreted as one year, one month, or any other length of time.

Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.

Sandra has a savings account that has accumulated to $50,000. She started with $28,225, and earned interest at 10% compounded annually. It took her five years to accumulate the $50,000. (^{PV of $1}, ^{FV of $1}, ^{PVA of $1}, and ^{FVA of $1}) (Use appropriate factor(s) from the tables provided.)

Russell Company has acquired a building with a loan that requires payments of $20,000 every six months for 5 years. The annual interest rate on the loan is 12%. What is the present value of the building? (^{PV of $1}, ^{FV of $1}, ^{PVA of $1}, and ^{FVA of $1}) (Use appropriate factor(s) from the tables provided.)

The number of periods in a present value calculation may only be expressed in years.

A company borrows money from the bank by promising to make 6 annual year-end payments of $27,000 each. How much is the company able to borrow if the interest rate is 9%?

A company is considering an investment that will return $22,000 semiannually at the end of each semiannual period for 4 years. If the company requires an annual return of 10%, what is the maximum amount it is willing to pay for this investment? (^{PV of $1}, ^{FV of $1}, ^{PVA of $1}, and ^{FVA of $1}) (Use appropriate factor(s) from the tables provided.)

A company is beginning a savings plan to purchase a new building. It will be saving $43,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 9% interest?

Explain the concept of the future value of a single amount.

Chris wants to accumulate $100,000 in 5 years. He plans on making equal semiannual deposits into an investment account that earns 12% semiannually in order to reach his goal. How much must Chris invest every six months? (^{PV of $1}, ^{FV of $1}, ^{PVA of $1}, and ^{FVA of $1}) (Use appropriate factor(s) from the tables provided.)

From the perspective of an account holder, a savings account is a liability with interest.