In: Accounting
(Appendix A) Future Value, Present Value
The following cases are each independent of the others.
Required:
1. Sam Lilliam places $5,000 in a savings
account that pays 3 percent. Suppose Sam leaves the original
deposit plus any interest in the account for two years. How much
will Sam have in savings after two years? If required, round your
answer to the nearest cent. (Note: the present value
tables cannot be used to answer this question; you must instead use
the formula that is presented in the appendix to the
chapter.)
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The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems.
2. Suppose that the parents of a 12-year-old son want to have $80,000 in a fund six years from now to provide support for his college education.
How much must they invest now to have the desired amount if the
investment can earn 4 percent?
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How much must they invest now to have the desired amount if the
investment can earn 6 percent?
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How much must they invest now to have the desired amount if the
investment can earn 8 percent?
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3. Killian Manufacturing is asking $500,000 for
automated equipment, which is expected to last six years and will
generate equal annual net cash inflows (because of reductions in
labor costs, material waste, and so on). What is the minimum cash
inflow that must be realized each year to justify the acquisition?
The cost of capital is 8 percent. Round your final answer to the
nearest dollar.
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The answer has been presented to the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.