You are on page 1of 5

# Chapter 6

EXERCISES
Exercise 6-1

## 2. FV = \$30,000 x 3.20714 = \$96,214

Future value of \$1: n=20, i=6% (from Table 1)

## 3. FV = \$40,000 x 17.44940 = \$697,976

Future value of \$1: n=30, i=10% (from Table 1)

## 4. FV = \$60,000 x 1.60103 = \$96,062

Future value of \$1: n=12, i=4% (from Table 1)

Exercise 6-2

## 2. PV = \$10,000 x .31180 = \$3,118

Present value of \$1: n=20, i=6% (from Table 2)

## 3. PV = \$25,000 x .05731 = \$1,433

Present value of \$1: n=30, i=10% (from Table 2)

## 4. PV = \$40,000 x .40388 = \$16,155

Present value of \$1: n=8, i=12% (from Table 2)

Exercise 6-3

1.

2.

\$31,947 =
\$70,000

.45639

3.

\$ 9,576 =
\$40,000

## Alternate Exercise and Problem Solutions

.2394
The McGraw-Hill Companies, Inc., 2013
6-1

4.

\$ 20,462 =
\$100,000

.20462

5.

Exercise

1.
6-4\$37,908

2.

= \$41,699

Exercise 6-5

= \$30,723

2.

\$298,058 =
\$60,000

4.96764

## Present value of an ordinary annuity of \$1: n=8, i=? (from Table 4, i =

approximately 12%)

3.

\$337,733 =
\$30,000

11.25777

## Present value of an ordinary annuity of \$1: n=?, i= 8% (from Table 4, n =

approximately 30 years)

4.

\$600,000 =
\$74,435

8.06072

## Present value of an ordinary annuity of \$1: n=15, i=? (from Table 4, i =

approximately 9%)

5.

\$200,000 =
4.11141

\$48,645

Exercise 6-6

PV

6-2

.80426=

\$4,800

PV

\$4,800
.80426

\$5,968

PVA =

14.99203=

\$5,968

annuity amount

PVA =

\$5,968
=
14.99203

\$398.08

Payment

## The McGraw-Hill Companies, Inc., 2013

6-3

PROBLEMS
1. PV = \$50,000 + (\$20,000 x 3.31213 )
Problem 6-1Equipment

= \$116,243 =

## 2. \$600,000 = Annuity amount x 4.24646

Future value of an ordinary annuity of \$1: n=4, i=4% (from Table 3)

## Annuity amount = \$600 ,000

4.24646
Annuity amount = \$141,294 = Required annual deposit

3. Choose the option with the lowest present value of cash outflows.
PV = - \$2,000,000
2. Lease option:
PVAD = - \$200,000 x 9.36492 = - \$1,872,984

Problem 6-2

## Choose the alternative with the highest present value.

Alternative 1:
PV = \$400,000
Alternative 2:
PV = PVAD = \$40,000 x 10.29498 = \$411,799
Present value of an annuity due of \$1: n=15, i=6% (from Table 6)

Alternative 3:
PVA = \$45,000

9.71225

\$437,051

## Present value of an ordinary annuity of \$1: n=15, i=6% (from Table 4)

The McGraw-Hill Companies, Inc., 2013
6-4

PV

= \$437,051

.79209

\$346,184

6-5