Exam 14: Applying Present and Future Values

A company is setting aside $21,354 today and wishes to have $30,000 at the end of three years for a down payment on a piece of property.What interest rate must the company earn?

What is interest?

Explain the concept of the future value of an annuity.

The present value factor for determining the present value of a single sum to be received three years from today at 10% interest compounded semiannually is 0.7462.

A company is creating a fund by depositing $65,763 today.The fund will grow to $90,000 after eight years.What annual interest rate is the company earning on the fund?

A company is considering an investment that will return $20,000 at the end of each semiannual period for four years.If the company requires an annual return of 10%,what is the maximum amount it is willing to pay for this investment?

A company is considering investing in a project that is expected to return $350,000 four years from now.How much is the company willing to pay for this investment if the company requires a 12% return?

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in seven years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for seven years.What amount must the company deposit annually?

An _____________ is a series of equal payments occurring at equal intervals.

Big League Sports borrowed $883,212 and must make annual year-end payments of $120,000 each.If the applicable interest rate is 6%,how many years will it take Big League Sports to pay off the loan?

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

Thompson Company has acquired a machine from a dealer which requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?