(Future Value and Present Value Problems) Presented below are three unrelated situations

E6-6 (Future Value and Present Value Problems) Presented below are three unrelated situations.

(a) Ron Stein Company recently signed a lease for a new office building, for a lease period of 10 years.
Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

(b) Kate Greenway Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $620,000. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not, what will the deficiency be?

(c) Under the terms of his salary agreement, president XXXXX XXXXX has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $75,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?

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(Present value of an annuity) What is the present value of the following annuities

Study Problem 5-6
5-6. (Present value of an annuity) What is the present value of the following annuities?
a. $2,500 a year for 10 years discounted back to the present at 7 percent
b. $70 a year for 3 years discounted back to the present at 3 percent
c. $280 a year for 7 years discounted back to the present at 6 percent
d. $500 a year for 10 years discounted back to the present at 10 percent

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(Present Value Analysis) James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals

PROBLEM 9-1. Present Value Analysis [LO 1, 5] James Hardy recently rejected a $20,000,000, five-year contract with the Vancouver Seals. The contract offer called for an immediate signing bonus of $5,000,000 and annual payments of $3,000,000. To sweeten the deal, the president of player personnel for the Seals has now offered a $22,000,000, five-year contract. This contract calls for annual increases and a balloon payment at the end of five years.

Year 1 $ 3,000,000
Year 2 3,100,000
Year 3 3,200,000
Year 4 3,300,000
Year 5 3,400,000
Year 5 balloon payment 6,000,000
Total $22,000,000

Required
Suppose you are Hardy’s agent and you wish to evaluate the two contracts using a required rate of return of 12 percent. In present value terms, how much better is the second contract?

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(Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods

ACC 421 Week 5

Exercise 6-5 (E6-5) (Computation of Present Value)
Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.
(a) $30,000 receivable at the end of each period for 8 periods compounded at 12%.
(b) $30,000 payments to be made at the end of each period for 16 periods at 9%.
(c) $30,000 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

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ADK Delivery is a small company that transports business packages between San Francisco and Los Angeles

Problem 16-16 Using Present Value Techniques to Evaluate Alternative Investment Opportunities

ADK Delivery is a small company that transports business packages between San Francisco and Los Angeles. It operates a fleet of small vans that move packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. ADK delivery recently acquired approximately $3 million of cash capital from its owners, and its president, Frank Hobb, is trying to identify the most profitable way to invest these funds.

AND SO ON

Check:
a. NPV of the vans investment: $75,608.57
b. NPV index of the trucks investment: 1.126

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