21.Karla Simpson invested $15,000 at 10% annual interest and left the money invested without withdrawing any of the interest for 15 years. At the end of the 15 years, Karla decided to withdraw the accumulated amount of money. Karla has found the following values in various tables related to the time value of money.
Present Value of 1 for 15 periods at 10% 0.23939
Future Value of 1 for 15 periods at 10% 4.17725
Present Value of an Annuity of 1 for 15 periods at 10% 7.60608
Future Value of an Annuity of 1 for 15 periods at 10% 31.77248
Which factor would she use to compute the amount she would withdraw, assuming that the investment earns interest compounded annually?
a.0.23939
b.4.17725
c.7.60608
d.31.77248
22.
Thomas Young invested $15,000 at 10% annual interest and left the money invested without withdrawing any of the interest for 15 years. At the end of the 15 years, Thomas decided to withdraw the accumulated amount of money. Thomas has found the following values in various tables related to the time value of money.
Present Value of 1 for 15 periods at 10% 0.23939
Future Value of 1 for 15 periods at 10% 4.17725
Present Value of an Annuity of 1 for 15 periods at 10% 7.60608
Future Value of an Annuity of 1 for 15 periods at 10% 31.77248
To the closest dollar, which amount would he withdraw, assuming that the investment earns interest compounded annually?
a. $18,591
b. $114,091
c. $47,659
d. $62,659
23.
Rowan and Lisa Sharp invested $10,000 in a savings account paying 5% annual interest when their son, Jeremy, was born. They also deposited $500 on each of his birthdays until he was 20 (including his 20th
birthday). Rowan and Lisa have obtained the following values related to the time value of money to help them with their planning process for their compounded interest decisions.
Present Value of 1 for 20 periods at 5% 0.37689
Future Value of 1 for 20 periods at 5% 2.65330
Present Value of an Annuity of 1 for 20 periods at 5% 12.46221
Future Value of an Annuity of 1 for 20 periods at 5% 33.06595
To the closest dollar, how much was in the savings account on his 20th
birthday (after the last deposit)?
a.$53,066
b.$43,066
c.$30,000
d.$26,533
24.
Harrison Marshall borrowed $65,000 on June 1, 2009. This amount plus accrued interest at 8% compounded annually is to be repaid on June 1, 2022. Harrison has obtained the following values related to the time value of money to help him with his financing process and compounded interest decisions.
Present Value of 1 for 13 periods at 8% 0.36770
Future Value of 1 for 13 periods at 8% 2.71962
Present Value of an Annuity of 1 for 13 periods at 8% 7.90378
Future Value of an Annuity of 1 for 13 periods at 8% 21.49530
To the closest dollar, how much will Harrison have to repay on June 1, 2022?
a. $132,600
b. $310,707
c. $116,375
d. $176,775
25.
Stranton Company is considering investing in an annuity contract that will return $40,000 annually at the end of each year for 12 years. Stranton has obtained the following values related to the time value of money to help in its planning process and compounded interest decisions.
Present Value of 1 for 12 periods at 9% 0.35554
Future Value of 1 for 12 periods at 9% 2.81267
Present Value of an Annuity of 1 for 12 periods at 9% 7.16073
Future Value of an Annuity of 1 for 12 periods at 9% 20.14072
To the closest dollar, what amount should Stranton Company pay for this investment if it earns a 9% return?
a. $497,066
b. $592,507
c. $805,629
d. $286,429
26.Everett Corporation issues a 8%, 9-year mortgage note on January 1, 2009, to obtain financing for new equipment. Land is used as collateral for the note. The terms provide for semiannual installment payments of $131,600. The following values related to the time value of money were available to Everett to help them with their planning process and compounded interest decisions.
Present Value of 1 for 9 periods at 8% 0.50025
Present Value of 1 for 18 periods at 4% 0.49363
Future Value of 1 for 9 periods at 8% 1.99900
Future Value of 1 for 18 periods at 4% 2.02582
Present Value of an Annuity of 1 for 9 periods at 8% 6.24689
Present Value of an Annuity of 1 for 18 periods at 4% 12.65930
Future Value of an Annuity of 1 for 9 periods at 8% 12.48756
Future Value of an Annuity of 1 for 18 periods at 4% 25.64541
To the closest dollar, what were the cash proceeds received from the issuance of the note?
a. $822,091
b. $947,520
c. $1,665,964
d. $1,643,363
27.Gaynor Company is considering purchasing equipment. The equipment will produce the following cash flows: Year 1, $25,000; Year 2, $45,000; Year 3, $60,000. Below is some of the time value of money information that Gaynor has compiled that might help them in their planning and compounded interest decisions.
1 period, 11%2 periods, 11%3 periods, 11%
Present Value of 10.900900.811620.73119
Future Value of 11.110001.232101.36763
Present Value of an Annuity of 10.900901.71252 2.44371
Future Value of an Annuity of 11.000002.12000 3.37440
Gaynor requires a minimum rate of return of 11%. To the closest dollar, what is the maximum price Gaynor should pay for the equipment?
a. $117,117
b. $102,917
c. $165,253
d. $246,209
28.Clarkson Corporation earns 12% on an investment that will return $900,000, 7 years from now. Below is some of the time value of money information that Clarkson has compiled that might help in planning compounded interest decisions.
Present Value of 1 for 7 periods at 12% 0.45235
Future Value of 1 for 7 periods at 12% 2.21068
Present Value of an Annuity of 1 for 7 periods at 12% 4.56376
Future Value of an Annuity of 1 for 7 periods at 12% 10.08901
To the closest dollar, what is the amount Clarkson should invest now to earn this rate of return?
a. $198,961
b. $407,115
c. $756,000
d. $410,738
29.Turner Company is considering an investment, which will return a lump sum of $450,000 four years from now. Below is some of the time value of money information that Turner has compiled that might help in planning compounded interest decisions.
Present Value of 1 for 4 periods at 10% 0.68301
Future Value of 1 for 4 periods at 10% 1.46410
Present Value of an Annuity of 1 for 4 periods at 10% 3.16986
Future Value of an Annuity of 1 for 4 periods at 10% 4.64100
To the closest dollar, what amount should Turner Company pay for this investment to earn a 10% return?
a. $270,000
b. $180,000
c. $307,355
d. $356,609
30.Mitch has been offered three different contracts for a service he provides.
Contract 1: $9,000 received at the beginning of each year for ten years, compounded at a 6 percent annual rate.
Contract 2: $9,000 received today and $20,000 received ten years from today. The relevant interest rate is 12 percent.
Contract 3: $9,000 received at the end of Years 4, 5, and 6. The relevant annual interest rate is 10 percent.
What is the present value of Contract 1?
a. $66,240.81
b. $118,627.11
c. $70,215.21
d. $125,744.76
31.Mitch has been offered three different contracts for a service he provides.
Contract 1: $9,000 received at the beginning of each year for ten years, compounded at a 6 percent annual rate.
Contract 2: $9,000 received today and $20,000 received ten years from today. The relevant interest rate is 12 percent.
Contract 3: $9,000 received at the end of Years 4, 5, and 6. The relevant annual interest rate is 10 percent.
What is the present value of Contract 2?
a. $9,337.13
b. $71,117.00
c. $29,000.00
d. $15,439.40
32.Mitch has been offered three different contracts for a service he provides.
Contract 1: $9,000 received at the beginning of each year for ten years, compounded at a 6 percent annual rate.
Contract 2: $9,000 received today and $20,000 received ten years from today. The relevant interest rate is 12 percent.
Contract 3: $9,000 received at the end of Years 4, 5, and 6. The relevant annual interest rate is 10 percent.
What is the present value of Contract 3?
a. $18,497.15
b. $16,815.56
c. $24,619.68
d. $22,381.52
33.Morgan is considering entering into a contract to sell a building on January 1 in exchange for a note. The note pays a lump sum payment of $300,000 in ten years and ten annual payments of $2,500 beginning on the date of sale (January 1). If the annual interest rate is 10 percent, what is the total present value of the contract?
a. $159,489.92
b. $132,559.55
c. $131,023.42
d. $155,505.55
34.Kaitlin is contemplating investing in Cocoa Beach Tans. She estimates that the company will pay the following dividends per share at the end of the next four years and that the current price of the company’s common stock, which is $100 per share, will remain unchanged.
Dividends
Year 1
Year 2
Year 3
Year 4
$6$7$8$9
If Kaitlin wants to earn 12 percent on her investment and plans to sell the investment at the end of the fourth year, how much would she be willing to pay for one share of common stock? (Round all calculations to the nearest cent.)
a. $130.00
b. $119.07
c. $85.90
d. $82.00