Austin Corporation's management took the following actions, which went into effect on January 2, 2014. Each action involved an application of present value.

1. Austin Corporation enters into a purchase agreement that calls for a payment of $250,000 three years from now.
2. Bought out the contract of a member of top management for a payment of $25,000 per year for four years beginning January 2, 2015.
3. Assuming an annualinterestrate of 10 percent, answer the following questions usingTable 1andTable 2.
   1. In action a, what is the present value of the liability for the purchase agreement?
   2. In action b, what is the cost (present value) of the buyout?