MANAGERIAL ACCOUNTING F/MGRS.
5th Edition
ISBN: 9781259969485
Author: Noreen
Publisher: RENT MCG
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Chapter 7A, Problem 7A.3E
To determine
Concept Introduction:
The time value of money is a concept that is applied to evaluate the projects having future
lump sum amount to be invested today.
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Exercise 14A-3 (Algo) Basic Present Value Concepts [LO14-7]
In six years, when he is discharged from the Air Force, Steve wants to buy a $14,000 power boat.
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
What lump-sum amount must Steve invest now to have the $14,000 at the end of six years if he can invest money at: (Round your final answer to the nearest whole dollar amount.)
Basic Present Value Concepts
In three years, when he is discharged from the Air Force, Steve wants to buy an $8,000 power boat.
Required:
What lump-sum amount must Steve invest now to have the $8,000 at the end of three years if he can invest money at:
1. Ten percent?
2. Fourteen percent?
Brief Exercises
BE6.7 (LO2) Jose Garcia's lifelong dream is to own a fishing boat to use in hisretirement. Jose has recently come into an inheritance of $400,000. He estimatesthat the boat he wants will cost $300,000 when he retires in 5 years. How much ofhis inheritance must he invest at an annual rate of 8% compounded annually) tobuy the boat at retirement?
BE6.8 (LO2) Refer to the data in BE6.7. Assuming quarterly compounding of amountsinvested at 8%, how much of Jose Garcia's inheritance must be invested to haveenough at retirement to buy the boat?
Chapter 7A Solutions
MANAGERIAL ACCOUNTING F/MGRS.
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