Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 7, Problem 7.12E
Future Value of a Deterred Annuity. Lenny Shafer Bakery and Co. budgeted $350,000 to build a factory 10 years from today. Shafer will finance the project by making six equal annual deposits of $50,000 at the end of each year commencing four years from today. The company can invest in a financial instrument earning 5%. Interest is compounded annually. Will Shafer have sufficient funds to pay for the $350,000 factory at the end of the 10-year period?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Say that you want to establish a scholarship fund that will make fixed payments forever. To fund the
scholarship, you plan to make 12 annual contributions of $9.9k to an investment account with an expected
return of 6.0% interest annually. Your first contribution occurs today. If the scholarship fund makes its first
payment two years following the last contribution, then what is the fixed annual payment that the
scholarship fund will award? (Round to the nearest dollar)
French Fried Food Inc. wishes to accumulate P500,000 during the next 24 months to open a second location. What constant amount should it pay at the end of each month into a money market savings account with an investment dealer, to attain its saving objectives? The planning assumption is that the account will earn 10% compounded semi-annually.
Find the present value of an annuity which pays P1,460 at the end of every 3 months of 6 years, if money is worth 9% compounded monthly?
If P2,000 is invested at the end of every year at 8% compounded semi-annually, what will be the total value of the periodic investment after 20 years?
A business sets up a sinking fund so they will have a $68,000.00 to pay for a replacement piece of equipment in 12 years when the current equipment will be sold for scrap. If they make deposits at the end of each quarter for 12 years in the investment that pays 6.3% compounded quarterly, what size should each payment be?
Answer: The quarterly payments are $. (Round to the nearest cent/penny)
Chapter 7 Solutions
Intermediate Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - If interest is compounded more than once a year,...Ch. 7 - Prob. 7.4QCh. 7 - Can an ordinary annuity table be used to determine...Ch. 7 - Prob. 7.6QCh. 7 - Is the present value of an ordinary annuity more...Ch. 7 - Prob. 7.8QCh. 7 - Simple Interest. Assume Shafer Corporation...Ch. 7 - Compound Interest. Assume Shafer Corporation...
Ch. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Present Value of a Single Sum, Compound Interest....Ch. 7 - Future Value of a Single Sum, Compound Interest....Ch. 7 - Prob. 7.8BECh. 7 - Present Value of a Single Sum, Compounded Interest...Ch. 7 - Prob. 7.10BECh. 7 - Present Value of a Single Sum, Calculating Time...Ch. 7 - Future Value of an Ordinary Annuity. An...Ch. 7 - Future Value of an Annuity Due. Mariah Carey...Ch. 7 - Future Value of an Ordinary Annuity: Calculating...Ch. 7 - Present Value of an Ordinary Annuity. CB...Ch. 7 - Present Value of an Annuity Due, Semiannual...Ch. 7 - Prob. 7.17BECh. 7 - Ordinary Annuity, Annuity Due, Using Interest...Ch. 7 - Prob. 7.2ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Future Value of an Ordinary Annuity, Future Value...Ch. 7 - Single Sum, Solving for Other Variables. Two...Ch. 7 - Ordinary Annuity, Solve for Interest Rate,...Ch. 7 - Present Value, Note Payable Prices. Wiz Khalifa...Ch. 7 - Future Value of a Deterred Annuity. Lenny Shafer...Ch. 7 - Prob. 7.13ECh. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Future Value of an Annuity Due, Decision Making....Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.1PCh. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Present Value, Present Value of an Annuity Due,...Ch. 7 - Prob. 7.4PCh. 7 - Prob. 7.5PCh. 7 - Prob. 7.6PCh. 7 - Prob. 7.7PCh. 7 - Present Value of an Annuity Due, Deferred...Ch. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Future Value of an Ordinary Annuity, Deferred...Ch. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Prob. 7.12PCh. 7 - Prob. 7.13PCh. 7 - Prob. 7.14PCh. 7 - Prob. 7.15P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Conestoga Plumbing plans to invest in a new pump that is anticipated to provide annual savings for 10 years of $50,000. The pump can be sold at the end of the period for $100,000. What is the present value of the investment in the pump at a 9% interest rate given that savings are realized at year end?arrow_forwardA business sets up a sinking fund so they will have a $49,000.00 to pay for a replacement piece of equipment in 7 years when the current equipment will be sold for scrap. If they make deposits at the end of each month for 7 years in the investment that pays 7.4% compounded monthly, what size should each payment be?arrow_forwardWarren buffet decides to endow an annual investment symposium at DePaul starting next year and continuing forever. The symposium is expected to cost $15000 at that time. Interest rates at 5% how much must he contribute todayarrow_forward
- 1. (From section 6.1) SouthWestern airlines sets up a sinking fund so that they will have $75,500 to pay for a replacement piece of equipment in 15 years when the current equipment will be sold for scrap. If they make deposits into the account at the beginning of every 3 months for 15 years, and the investment account pays 4.4% interest compounded every 3 months, what will the quarterly deposit be to reach their goal? (a) Which formula will you use? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = A or Po = r = (c) Write the formula you will use with the numbers plugged in below. (d) Solve using your calculator or technology and round to two decimal places. Work is not required here. Write the answer here and state which variable you solved for. (e) Using your own words, describe what you found by solving the equation in terms of the word problem given.arrow_forwardwhat is the cost of the new animal shelter? Shuler Dog Care Co. wants to finance a new animal shelter by making eight annual deposits into a fund earning 6% compounded annually. The first four deposits are to be $24,000 each and will be paid at the beginning of the next four years. The last four deposits are to be $35,000 each and will be paid at the beginning of the last four years.arrow_forwardA business sets up a sinking fund so they will have a $66,000.00 to pay for a replacement piece of equipment in 9 years when the current equipment will be sold for scrap. If they make deposits at the end of every 2 months for 9 years in the investment that pays 6.6% compounded every 2 months, what size should each payment be? Answer: The every 2 months payments are $. (Round to the nearest cent/penny)arrow_forward
- (Annuity payments) The Aggarwal Corporation needs to save $10 million to retire a(n) $10 million mortgage that matures in 20 years. To retire this mortgage, the company plans to put a fixed amount into an account at the end of each year for 20 years. The Aggarwal Corporation expects to earn 8 percent annually on the money in this account. What equal annual contribution must the firm make to this account to accumulate the $10 million by the end of 20 years? The equal annual contribution the firm must make to this account is $ (Round to the nearest cent.)arrow_forwardDrexter's Shop wants to start a fund to accumulate half of the expected P600,000 cost of expanding their facilities in 8 years. What semiannually account must be paid into the fund earning 6% compounded quarterly in order to reach the target?arrow_forwardYou plan to make a lump-sum deposit of $5000 now into an investment account that pays 6% per year, and you plan to withdraw an equal end-of-year amount of $1000 for 5 years, starting next year. At the end of the sixth year, you plan to close your account by withdrawing the re- maining money. Define the engineering economy symbols involved.arrow_forward
- now! - Red Deer College wants to set up a scholarship for students in its business programs such that at the end of every year it could distribute a total of $50,000. If the perpetuity fund can earn 4.85% compounded semi- annually, how much money will need to be raised to fund the scholarship? Carradine Industries needs to set a two-year quarterly lease price on some new equipment it is offering to itsarrow_forwardCustomers buy this product on their 65th birthday when they retire. The annuity will make 20 annual payments of $80,000. The first annual payment of $80,000 will occur on the customer’s 68th birthday (customers typically rely on their personal savings to travel for the first few years). For this product, Wagon Financial can invest the customers’ money at 12% per annum effective.1. What price should Wagon Financial charge for this product?arrow_forwardPinnacle Homes, a real estate development company, is planning to build five homes, each costing $155,000, in 4.5 years. The Galaxy Bank pays 6% interest compounded semiannually. How much should the company invest now to have sufficient funds to build the homes in the future? Round your answer to the nearest cent.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License