Exam 6: Accounting and the Time Value of Money

On January 1, 2007, Carly Company decided to begin accumulating a fund for asset replacement five years later.The company plans to make five annual deposits of $50,000 at 9% each January 1 beginning in 2007.What will be the balance in the fund, within $10, on January 1, 2012 (one year after the last deposit)? The following 9% interest factors may be used. Present Value of Future Value of Ordinary Annuity Ordinary Annuity 4 periods 3.2397 4.5731 5 periods 3.8897 5.9847 6 periods 4.4859 7.5233

The number of compounding periods will always be one less than the number of rents when computing the future value of an ordinary annuity.

Interest is the excess cash received or repaid over and above the amount lent or borrowed.

On January 15, 2007, Flynn Corp.adopted a plan to accumulate funds for environmental improvements beginning July 1, 2011, at an estimated cost of $4,000,000.Flynn plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually.The first deposit was made on July 1, 2007.Future value factors are as follows: Future value of 1 at 10\% for 5 periods 1.61 Future value of ordinary annuity of 1 at 10\% for 4 periods 4.64 Future value of annuity due of 1 at 10\% for 4 periods 5.11 Flynn should make four annual deposits of

If $4,000 is put in a savings account today, what amount will be available six years from now?

Craig Rusch Corporation will receive $10,000 today (January 1, 2006), and also on each January 1st for the next five years (2007 - 2011).What is the present value of the six $10,000 receipts, assuming a 12% interest rate?

Which of the following tables would show the smallest value for an interest rate of 5% for six periods?

What amount should be deposited in a bank account today to grow to $10,000 three years from today?

Which table would show the largest factor for an interest rate of 8% for five periods?

Wagner Corporation will invest $25,000 every January 1st for the next six years (2006 - 2011).If Wagner will earn 12% on the investment, what amount will be in the investment fund on December 31, 2011?

The future value of a single sum is determined by multiplying the future value factor by its present value.

Which of the following transactions would best use the present value of an annuity due of 1 table?

Windsor Company will receive $100,000 in 7 years.If the appropriate interest rate is 10%, the present value of the $100,000 receipt is

If an individual put $4,000 in a savings account today, what amount of cash would be available two years from today?

Swanson Company will receive $100,000 in a future year.If the future receipt is discounted at an interest rate of 8%, its present value is $63,017.In how many years is the $100,000 received?

Renfro Corporation will receive $20,000 today (January 1, 2006), and also on each January 1st for the next five years (2007 - 2011).What is the present value of the six $20,000 receipts, assuming a 12% interest rate.?

Foley Company financed the purchase of a machine by making payments of $18,000 at the end of each of five years.The appropriate rate of interest was 8%.The future value of one for five periods at 8% is 1.46933.The future value of an ordinary annuity for five periods at 8% is 5.8666.The present value of an ordinary annuity for five periods at 8% is 3.99271.What was the cost of the machine to Foley?

Jensen Company will invest $200,000 today.The investment will earn 6% for 5 years, with no funds withdrawn.In 5 years, the amount in the investment fund is

The present value of an ordinary annuity is the present value of a series of equal rents withdrawn at equal intervals.

Quincey Corporation makes an investment today (January 1, 2006).They will receive $10,000 every December 31st for the next six years (2006 - 2011).If Quincey wants to earn 12% on the investment, what is the most they should invest on January 1, 2006?