1.

An actuary has determined that a company should have P90,000,000 accumulated in its pension fund
20 years from now for the fund to be able to meet its obligations. An interest rate of 8% is considered
appropriate for all pension fund calculations. The company wishes to know how much it should
contribute to the pension fund at the end of each of the next 20 years. Which set of instructions
correctly describes the procedures necessary to compute the annual contribution?

Answer: Divide P90 Million by the factor for future value of an ordinary annuity.

2. Snow Company plans to invest P2,000 at the end of the next ten years. Assume that Snow Company
will earn interest at an annual rate of 6% compounded annually. The future amount of an ordinary
annuity of P1 for 10 periods at 6% is 13.181. The present value of P1 for ten periods at 6% is 0.558. The
present value of an ordinary annuity of P1 for ten periods at 6% is 7.360. The investment after the end
of ten years would be:

Answer: 26,362

3. Jasper Company has a payback goal of 3 years on new equipment acquisitions. A new sorter is being
evaluated that costs P450,000 and has a 5-year life. Straight-line depreciation will be used; no salvage is
anticipated. Jasper is subject to a 40% income tax rate. To meet the Company's payback goal the sorter
must generate reductions in annual cash operating costs of:

Answer: 190,000

4. Palafox and Company is considering an investment proposal for P10,000,000 yielding a net present
value of P450,000. The project has a life of seven years with salvage value of P200,000. The company
uses a discount rate of 12%. Which of the following would decrease the net present value?

Answer: Increase the discount rate to 15%.