Qrb/501 Week Six

Ch. 6, problem P6.25

Renter Co. acquired the use of a machine, by agreeing to pay the manufacturer
of the machine \$900 per year, for 10 years.   At the time lease was signed, the
Interest rate for a 10 year loan was 12%.

A. The factor is 5.6502   (12% column, 10 period row, table 6-5)
PV= Payment x PV Factor of an Annuity
PV= \$900 * 5.6502 = 5,085.18 rounded to 5,085.20

B. The causes of the difference between answers A and B are the interest.

C. The best amount are 5,085.18

2) Ch. 6, problem P6.26

Using a present value table, you calculator or computer program present value
Function, answer the following questions:

A. PV= Payment * PV Factor of an Annuity
= 4,000 * 6.8017 (6% column, 9 period row, table 6-5)
= 27,206.76

B. PV= Future Value x PV Factor
= 15,000 * 0.0365 (18% column, 20 period row, table 6-4)
= 547.5

D. PV= Future Value x PV Factor
= 300,000 * 0.3186 (10% column, 12 period row, table 6-4)
= 95,580

E. PV= Future Value   x   PV Factor
= 50,000*0.4523 (12% column, 7 period row, table 6-4)
= 22,615

Reference

University of Phoenix.   Marshall, D. H., McManus, W. W., & Viele, D. F. (2004). Accounting: What the numbers mean. (6th ed.). New York: McGraw-Hill. Retrieved in March 30, 2010 from: rEsource, QRB/501-Web site: Quantitative Reasoning for Business. https://ecampus.phoenix.edu