Question
(a) Cullumber Company earns 6% on an investment that pays back $98,700 at the end of each of the next 7 years.
What is the amount Cullumber Company invested to earn the 6% rate of return??
Table 3 Present Value of 1 10% 12% 15% Periods 96154 .95238 .94340 .93458 .92593 .91743 .90909 90090 .89286 .86957 92456 .90703 .89000 .87344 .85734 .84168 .82645 .81162 .79719 .75614 88900 86384 .83962 81630 .79383 .77218 .75132 .73119 .71178 .65752 85480 82270 .79209 .76290 .73503 .70843 .68301 .65873 .63552 .57175 82193 .78353 .74726 .71299 .68058 .64993 .62092 .59345 .56743 49718 79031 74622 .70496 66634 .63017 .59627 .56447 .53464 .50663 43233 75992 .71068 66506 .62275 .58349 .54703.51316 48166 45235 .37594 73069 67684 62741 .58201 .54027 50187 46651 43393 40388 .32690 70259 6446.59190 .54393 .50025 .46043 42410 .39092 .36061 .28426 67556.61391 .55839 .5083546319 4224 .38554 .35218 .32197 .24719 64958 .58468 .52679 .47509 .42888 .38753 .35049 .31728 .28748 .21494 62460 .55684 49697 44401.39711 .35554.31863 .28584 .25668 .18691 60057 .53032 .46884 .41496 .36770 .32618 .28966 .25751 .22917 .16253 57748 .50507 .44230 .38782 .34046 .29925 .26333 .23199 .20462 .14133 55526 .48102 .41727 .36245 .31524 .27454 .23939 .20900 .18270 .12289 53391 .45811 .39365 .33873 .29189 .25187 .21763 .18829 .163 12 .10687 51337 .43630 .37136 .31657 .27027 .23107 .19785 .16963 .14564 .09293 49363 41552 .35034 .29586 .25025 .21199 .17986 .15282 .13004 .08081 47464 .39573 .33051 .27615 .23171 .19449 .16351 .13768 .11611 .07027 45639 .37689 .31180 .25842 .21455 .17843 .14864 .12403 .10367 .06110 10 12 13 14 15 16 17 18 19 20
Explanation / Answer
Reqa: Annual inflows 98700 Annuity factor for 7 yrs at 6% 5.58238 Amount of Investment required 550980.9 Req b: Cost of machine 3200.04 Less: Down payment made 550.25 Amount financed 2649.79 Divide: Annuity factor for 12 yrs at 8% 7.53608 Annual payment 351.61
