Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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![Required information
[The following information applies to the questions displayed below.]
On January 1, Boston Company completed the following transactions
(use a 7% annual interest rate for all transactions): (FV of $1, PV of $1,
FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
a. Promised to pay a fixed amount of $6,800 at the end of each
year for seven years and a one-time payment of $116,600 at the
end of the 7th year.
b. Established a plant remodeling fund of $491,200 to be available
at the end of Year 8. A single sum that will grow to $491,200 will
be deposited on January 1 of this year.
c. Agreed to pay a severance package to a discharged employee.
The company will pay $75,800 at the end of the first year,
$113,300 at the end of the second year, and $150,800 at the end
of the third year.
d. Purchased a $174,000 machine on January 1 of this year for
$34,800 cash. A five-year note is signed for the balance. The
note will be paid in five equal year-end payments starting on
December 31 of this year.
Required:
1. In transaction (a), determine the present value of the debt.
Note: Round your intermediate calculations and final answer to nearest whole
dollar.
Present value](https://content.bartleby.com/qna-images/question/9a031943-69df-41ae-87a0-1a65df533c3e/98d748b9-7508-4951-8129-aeb9ab8c5c14/3tv3w17_processed.jpeg)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
On January 1, Boston Company completed the following transactions
(use a 7% annual interest rate for all transactions): (FV of $1, PV of $1,
FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
a. Promised to pay a fixed amount of $6,800 at the end of each
year for seven years and a one-time payment of $116,600 at the
end of the 7th year.
b. Established a plant remodeling fund of $491,200 to be available
at the end of Year 8. A single sum that will grow to $491,200 will
be deposited on January 1 of this year.
c. Agreed to pay a severance package to a discharged employee.
The company will pay $75,800 at the end of the first year,
$113,300 at the end of the second year, and $150,800 at the end
of the third year.
d. Purchased a $174,000 machine on January 1 of this year for
$34,800 cash. A five-year note is signed for the balance. The
note will be paid in five equal year-end payments starting on
December 31 of this year.
Required:
1. In transaction (a), determine the present value of the debt.
Note: Round your intermediate calculations and final answer to nearest whole
dollar.
Present value
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