323648199-Solution-Manual-for-Financial-Accounting-Tools-for-Business-Decision-Making-7th-Edition-Paul-D-Kimmel-doc.pdf

Full file at http://testbankinstant.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making,-7th-Edition-Paul-D.- Kimmel- APPENDIX D Time Value of Money Learning Objectives 1. Distinguish between simple and compound interest. 2. Solve for future value of a single amount. 3. Solve for future value of an annuity. 4. Identify the variables fundamental to solving present value problems. 5. Solve for present value of a single amount. 6. Solve for present value of an annuity. 7. Compute the present value of notes and bonds. 8. Use a financial calculator to solve time value of money problems. Summary of Questions by Learning Objectives and Bloom’s Taxonomy Item LO BT Item LO BT Item LO BT Item LO BT Item LO BT Brief Exercises  1. 2 AP  8. 5, 6 AP 14. 5, 6, 18. 6 AP 25. 8 AP  2. 2, 3 C  9. 5 AP 7 AP 19. 6, 7 AP 26. 8 AP  3. 2 AP 10. 5 AP 15. 5, 6, 20. 5 AN 27. 8 AP  4. 3 AP 11. 6 AP 7 AP 21. 5 AN 28. 8 AP  5. 2, 3 AP 12. 6 AP 16. 5, 6, 22. 6 AN  6. 2 AP 13. 5, 6, 7 AP 23. 6 AN  7. 5, 6 C 7 AP 17. 6, 7 AP 24. 8 AP download full file at http://testbankinstant.com 57789 = $981. Financial Accounting.48 BRIEF EXERCISE D-4 FV of an annuity of 1 = p X FV of an annuity factor = $78.60103 = $14.05 X 12 years I = $4.075. Solutions Manual    (For Instructor Use Only) .79586 (from Table 1) Accumulated amount = $8.000 + $4.800 Accumulated amount = $8.88 BRIEF EXERCISE D-2 (a) (b) (a) (b) (1) A 6% 3 periods (2) A 5% 8 periods B 4% 8 periods B 3% 12 periods BRIEF EXERCISE D-3 FV = p X FV of 1 factor = $9.79586 = $14.000 X .729. Inc.   Kimmel. SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE D-1 (a) Interest = p X i X n I = $8.366.000 X 12.200 X 1.800 (b) Future value factor for 12 periods at 5% is 1.800 = $12.000 X 1.42 D-2 Copyright © 2013 John Wiley & Sons.7/e. 000 X 2.000 X 25.53862 = $52.41 = $37.Full file at http://testbankinstant.08 BRIEF EXERCISE D-7 (a) (b) (1) A 12%   6 periods B 10% 11 periods C 3% 18 periods (2) A 12% 20 periods B 10%  5 periods C 4%  8 periods BRIEF EXERCISE D-8 (a) i = 10% ? $28.000 to be received in 9 years discounted at 10% is therefore $11.64541) = $12.- Kimmel- BRIEF EXERCISE D-5 FV = p X FV of 1 factor + (p X FV of an annuity factor) = ($6.-7th-Edition-Paul-D.154.92 + $25.313.000 X 1.42410 (9 periods at 10%).000 0 1 2 3 4 5 6 7 8 9 Discount rate from Table 3 is .645.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making. Present value of $28. download full file at http://testbankinstant.800.42410).80 ($28.000 X .02582) + ($1.com .33 BRIEF EXERCISE D-6 FV = p X FV of 1 factor = $34.874. 7/e. Solutions Manual    (For Instructor Use Only) .   Kimmel. Inc.D-4 Copyright © 2013 John Wiley & Sons. Financial Accounting. Elmdale Company should therefore invest $487.76 ($28. BRIEF EXERCISE D-9 i = 9% ? $750.000 each discounted at 9% is therefore $125.48592 (6 periods at 9%).48592).000 $28.000 to be received in 8 years discounted at 10% is therefore $223.447. Present value of $480.000 0 1 2 3 4 5 Discount rate from Table 3 is .64993).000 X .-7th-Edition-Paul-D.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making.000 in five years.000 $28.000 $28.605.000 X 4.46651 (8 periods at 10%).- Kimmel- BRIEF EXERCISE D-8 (Continued) (b) i = 9% ? $28.50 ($750.924.000 0 1 2 3 4 5 6 7 8 Discount rate from Table 3 is .447.com .000 to be received in 5 years discounted at 9% is therefore $487.000 $28.80 download full file at http://testbankinstant.Full file at http://testbankinstant.000 $28. Present value of $750.50 to have $750. BRIEF EXERCISE D-10 i = 10% ? $480.64993 (5 periods at 9%).000 0 1 2 3 4 5 6 Discount rate from Table 4 is 4. Present value of 6 payments of $28.    Kimmel. Financial Accounting.000 X .80 to have $480. Solutions Manual    (For Instructor Use Only) .46651).7/e.924. Inc.($480. Orear Company should invest $223. D-6 Copyright © 2013 John Wiley & Sons.000 in eight years. 084.20 ($90. download full file at http://testbankinstant.000 0 1 2 3 4 5 6 Discount rate from Table 4 is 4.70 for this annuity contract.000 $45.000 $45. Present value of 15 payments of $45.084.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making. Nolasko Enterprises invested $416.- Kimmel- BRIEF EXERCISE D-11 i = 5% ? $45.000 each discounted at 8% is therefore $416.000 X 4.000 $45.-7th-Edition-Paul-D.000 $90.000 X 10.37966.000 $45.70 ($45.000 $90.62288). BRIEF EXERCISE D-12 i = 8% ? $90. Present value of 6 payments of $90. Dayton Company should pay $467.000 $90.059.com .Full file at http://testbankinstant.000 $90.059.37966).20 to earn $90.000 0 1 2 3 4 14 15 Discount rate from Table 4 is 10.000 per year for six years.000 $90.62288.000 $45.000 each discounted at 5% is therefore $467. .......... This may be proven as follows: Present value of principal to be received at maturity: $300......83 Present value of bonds.........500 $13......................000).........306.   Kimmel.......... Inc...........000 X ........... Financial Accounting.....00 Present value of interest to be received periodically over the term of the bonds: $13..45 BRIEF EXERCISE D-14 The bonds will sell at a discount (for less than $300................................ $281............... $320..500 X 13.............000 X 0..00 Present value of interest to be received periodically over the term of the bonds: $13................46221 (PV of $1 due each period for 20 periods at 5% from Table 4).59033 (PV of $1 due each period for 20 periods at 4% from Table 4).........917.........37689 (PV of $1 due in 20 periods at 5% from Table 3).500 $13..............500 X 12...........45639 (PV of $1 due in 20 periods at 4% from Table 3)......45 Present value of bonds........................500 $13.......239............ 168....067...500 $13................................... Solutions Manual    (For Instructor Use Only) .....500 Diagram for Interest 0 1 2 3 4 19 20 Present value of principal to be received at maturity: $300.............................. $136.386.. $113.............469...... 183.........000 Diagram for Principal 0 1 2 3 4 19 20 i = 4% ? $13...83 D-8 Copyright © 2013 John Wiley & Sons...............................7/e........BRIEF EXERCISE D-13 i = 4% ? $300................500 $13..... . $58.....88 Present value of interest to be received annually over the term of the note: $3.......74 download full file at http://testbankinstant..082...............840 $3.......... $40......000 Diagram for Principal 0 1 2 3 4 5 6 i = 8% ? $3....63017 (PV of $1 due in 6 periods at 8% from Table 3).-7th-Edition-Paul-D. 17....000 X ............840 Diagram for Interest 0 1 2 3 4 5 6 Present value of principal to be received at maturity: $64........840 $3.......840 $3........................86 Present value of note received...751..........62288 (PV of $1 due each period for 6 periods at 8% from Table 4)..Full file at http://testbankinstant...................840 $3...........CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making....- Kimmel- BRIEF EXERCISE D-15 i = 8% ? $64............com .....330.......840 $3......840 X 4............... ........600..... Financial Accounting.83777 (PV of $1 due each period for 16 periods at 5% from Table 4)..605....105 BRIEF EXERCISE D-17 i = 10% ? $3..000 $117.000 purchase price of the retreading machine.. $1... D-10 Copyright © 2013 John Wiley & Sons........000 $117.000 Diagram for Interest 0 1 2 3 4 14 15 16 Present value of principal to be received at maturity: $2.........33493......000 $117.300 $3........27 ($3..000$117.. Solutions Manual    (For Instructor Use Only) ...........300 $3. $2..........000 X 10.019 Present value of bonds and cash proceeds.......... Inc..300 each discounted at 10% is therefore $17.191.45811 (PV of $1 due in 16 periods at 5% from Table 3).............. Present value of 8 payments of $3..300 $3..459..000 Diagram for Principal 0 1 2 3 4 14 15 16 i = 5% ? $117..300 $3........ Phil Emley should not purchase the tire retreading machine because the present value of the future cash flows is less than the $18........086* Present value of interest to be received periodically over the term of the bonds: $117......33493)...........000 $117........000 $117..300 $3........268.000 X 0....7/e...300 $3....  1..300 X 5.300 0 1 2 4 5 6 7 Discount rate from Table 4 is 5...BRIEF EXERCISE D-16 i = 5% ? $2....300 $3...   Kimmel......600... 169.545.000 0 1 2 3 To determine the present value of the future cash flows.00 Present value of future cash flows $105.850 $46.66 from the issuance of the note.850 $46.169.com .Full file at http://testbankinstant. If Pendley pays less than $105. download full file at http://testbankinstant.11090.90909) = $ 34.42.75132) = 37.566.000 X .000 $40.- Kimmel- BRIEF EXERCISE D-18 i = 4% ? $46.850 X 8.00 Year 3 ($50. its rate of return will be greater than 10%.850 each discounted at 4% is therefore $379.000 X .-7th-Edition-Paul-D. Pendley Company should pay no more than $105.42.850 $46.42 To achieve a minimum rate of return of 10%.995.058.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making.000 $50.11090).66 ($46.169.000 X . Jamison Company should receive $379.82645) = 33.995. Present value of 10 payments of $46. discount the future cash flows at 10%.42 Year 2 ($40. using Table 3.850 0 1 2 3 4 9 10 Discount rate from Table 4 is 8.850 $46.850 $46. BRIEF EXERCISE D-19 i = 10% ? $38. Year 1 ($38. 000 X Present value of 1 factor Present value of 1 factor = $25.000 = . Inc.172. Financial Accounting.000 = . Barbara Oxford will receive a 6% return.   Kimmel. BRIEF EXERCISE D-21 i = 10% $25.000 n=? Present value = Future value X Present value of 1 factor $25.65 $10.65 ÷ $10.172.490 = $80.BRIEF EXERCISE D-20 i=? $4. Blake Mohr therefore must wait 12 years to receive $80.490 ÷ $80.7/e.65 = $10.172.000 X Present value of 1 factor Present value of 1 factor = $4.000 0 1 2 3 4 14 15 Present value = Future value X Present value of 1 factor $4. Solutions Manual    (For Instructor Use Only) .000.490 $80.41727 for 15 periods is found in the 6% column. D-12 Copyright © 2013 John Wiley & Sons.31863 at 10% is found in the 12 years row.41727 The .31863 The . -7th-Edition-Paul-D. Amanda Tevis will therefore earn a rate of return of 9%.000 $1.000 $1.14612 at an interest rate of 11% is shown in the 8-year row.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making.000 = 9.com . Therefore.12 = $1.12 ÷ $1.000 $5.55 ÷ $1.000 $1.000 $1.000 X Present value of an annuity factor Present value of an annuity factor = $5. download full file at http://testbankinstant.12855 The 9.000 $1.000 $1.146.000 $1.12 n=? Present value = Annuity amount X Present value of an annuity factor $5.000 0 1 2 3 4 5 6 19 20 $9. Kelly will receive 8 payments.128.000 $1.000 $1.- Kimmel- BRIEF EXERCISE D-22 i=? ? $1.000 $1.55 Present value = Annuity amount X Present value of an annuity factor $9.000 $1.146.000 = 5.14612 The 5.146.128. BRIEF EXERCISE D-23 i = 11% $1.12855 for 20 periods is found in the 9% column.128.000 $1.55 = $1.Full file at http://testbankinstant.000 X Present value of an annuity factor Present value of an annuity factor = $9. 000 0 50. PV PMT FV 7.860 0 N I/YR.7/e. PV PMT FV 3. PV PMT FV 10. Solutions Manual    (For Instructor Use Only) .000 –8.   Kimmel. Financial Accounting. Inc.55% (semiannual) D-14 Copyright © 2013 John Wiley & Sons.000 N I/YR.76% BRIEF EXERCISE D-25 10 ? 60.80% BRIEF EXERCISE D-26 40 ? 178.BRIEF EXERCISE D-24 10 ? –18.000 –8.400 0 N I/YR. com .000 200.530.65 ? 14.-7th-Edition-Paul-D.000 0 N I PV PMT FV Answer: 86.000 N I PV PMT FV Answer: –178.- Kimmel- BRIEF EXERCISE D-27 (a) Inputs: 7 6.Full file at http://testbankinstant.9 ? –16.52 download full file at http://testbankinstant.CH/Solution-Manual-for-Financial- Accounting-Tools-for-Business-Decision-Making.07 (b) Inputs: 10 8.491. 8 42.964. Inputs: 5 7. Inputs: 96 7.20 D-16 Copyright © 2013 John Wiley & Sons.000 ? 0 N I PV PMT FV Answer: –589.BRIEF EXERCISE D-28 (a) Note—set payments at 12 per year. Solutions Manual    (For Instructor Use Only) . Inc.7/e.25 8.   Kimmel. Financial Accounting.48 (b) Note—set payments to 1 per year.000 ? 0 N I PV PMT FV Answer: –1.