Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Exercise 10-4A Determining the present value of an annuity The dean of the School of Fine Arts is trying to decide whether to purchase a

image text in transcribed
image text in transcribed
image text in transcribed
Exercise 10-4A Determining the present value of an annuity The dean of the School of Fine Arts is trying to decide whether to purchase a copy machine to place in the lobby of the building. The machine would add to student convenience, but the dean feels com- pelled to earn an 8 percent return on the investment of funds. Estimates of cash inflows from copy machines that have been placed in other university buildings indicate that the copy machine would probably produce incremental cash inflows of approximately $25,000 per year. The machine is expected to have a three-year useful life with a zero salvage value. Required Round your figures to two decimal points. a. Use Present Value Appendix Table 1 to determine the maximum amount of cash the dean should be willing to pay for a copy machine. b. Use Present Value Appendix Table 2 to determine the maximum amount of cash the dean should be willing to pay for a copy machine. c. Explain the consistency or lack of consistency in the answers to Requirements a and b. APPENDIX TABLE 1 Present Value of $1 5% 6% 4% 7% 8% n 9% 10% 12% 14% 16% 20% 1 2 3 4 5 0.961538 0.952381 0.924556 0.907029 0.888996 0.863838 0.854804 0.822702 0.821927 0.783526 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 0.889996 0.873439 0.857339 0.841680 0.826446 0.797194 0.769468 0.743163 0.694444 0.839619 0.816298 0.793832 0.772183 0.751315 0.711780 0.674972 0.640658 0.578704 0.792094 0.762895 0.735030 0.708425 0.683013 0.6355180.592080 0.552291 0.482253 0.747258 0.712986 0.580583 0.649931 0.620921 0.567427 0.519369 0.476113 0.401878 0.704961 0.666342 0.630170 0.596267 0.564474 0.506631 0.455587 0.410442 0.334898 0.665057 0.622750 0.583490 0.547034 0.513158 0.452349 0.399537 0.353830 0.279012 0.627412 0.582009 0.540269 0.501866 0.466507 0.4038 0.350559 0.305025 0.232568 0.591898 0.543934 0.500249 0.460428 0.424098 0.360610 0307508 0.262953 0.193807 0.558395 0.508349 0.463193 0.422411 0.385543 0.321973 0.269744 0.226684 0.161506 6 8 0.790315 0.746215 0.759918 0.710681 0.730690 0.676839 0.702587 0.644609 0.675564 0.613913 9 10 11 12 13 14 15 0.649581 0.584679 0.624597 0.556837 0.600574 0.530321 0.577475 0.505068 0.555265 0.481017 0.526788 0.496969 0.468839 0.442301 0.417265 0.475093 0.428883 0.387533 0.350494 0.287476 3.235617 0.195417 0.134588 0.444012 0.397114 0.355535 0.318631 0.256575 0,2075590.168463 0.112157 0.414964 0.367698 0.326179 0.289664 0.229174 0.182069 0.145227 0.093464 0.387817 0.340461 0.299246 0.263331 0.204620 0.159710 0.125195 0.077887 0.362446 0.315242 0.274538 0.239392 0.182696 0.140096 0.107927 0.064905 0.338735 0.291890 0.251870 0.217629 0.163122 0.122892 0.093041 0.054088 0.316574 0.270269 0.231073 0.197845 0.145644 0.107800 0.080207 0.045073 0.295864 0.250249 0.211994 0.179859 0.130040 0.094561 0.069144 0.037561 0.276508 0.231712 0.194490 0.163508 0.116107 0.082948 0.059607 0.031301 0.258419 0.214548 0.178431 0.148644 0.103667 0.072762 16 17 18 19 20 0.533908 0.513373 0.493628 0.474642 0.456387 0.458112 0.436297 0.415521 0.395734 0.376889 0.393646 0.371364 0.350344 0.330513 0.311805 0.051385 0.026084 TABLE 2 Planning for Capital Investments Present Value of an Annuity of $1 n 4% 5% 6% 7% 1 8% 9% 10% 12% 16% 20% 2 3 4 5 0.961538 1.886095 2.775091 3.629895 4.451822 0.952381 1.859410 2.723248 3.545951 4.329477 0.943396 1.833393 2.673012 3.465106 4.212364 0.934579 1.808018 2.624316 3.387211 4.100197 0.925926 0.917431 0.909091 0.892857 0.877193 0.8520690.833333 1.783265 1.759111 1.735537 1.690057 1.646661 1.605232 1.527778 2.577097 2.531295 2.486852 24013372321632 2.245390 2.105481 3.312127 3.239720 3.169865 3.037349 2913712 2.798181 2.588735 3.992710 3.889651 3.790787 3.504776 343302 3.2742942990612 6 8 9 10 5.242137 6.002055 6.732745 7.435332 8.110896 5.075692 5.786373 6.463213 7.107822 7.721735 4.917324 5.582381 6.209794 6.801692 7.360087 4.766540 5.389289 5.971299 6.515232 7.023582 11 8.760477 12 9.385074 13 9.985648 14 10.563123 15 11.118387 8.306414 8.863252 9.393573 9.898641 10.379658 4.622880 4.485919 4.3552614111407 3.8886683584736 3.325510 5.206370 5.032953 4.868419 4.563757 4.288305 4.038565 3.604592 5.746639 5.534819 5.334926 4.967640 4.638864 4.343591 3.837160 6.245988 5.995247 5.759024 5.328250 4.946372 4.606544 4.030967 6.710081 6.417658 6.144567 5.6502235.216116 4.833227 4.192472 7.136964 6.805191 6.495051 5.937699 5.452733 5.028644 4.327060 7.536078 7.160725 6.813692 6.194374 5.660292 5.197107 4.439217 7.903776 7.486904 7.103356 6.423548 5.842362 5.342334 4.532681 8.244237 7.786150 7.366687 6.628168 6.002072 5.467529 4.610567 8.5594798.060688 7.606080 6.810864 6.142168 5.575456 4.675473 7.886875 8.383844 8.852683 9.294984 9.712249 7.498674 7.942686 8.357651 8.745468 9.107914 16 11.652296 17 12.165669 18 12.659297 19 13.133939 20 13.590326 10.837770 10.105895 9.446649 11.274066 10.477260 9.763223 11.689587 10.827603 10.059087 12.085321 11.158116 10.335595 12.462210 11.469921 10.594014 8.851369 8.312558 7.823709 6.973986 6.265060 5.668497 4.729561 9.121638 8.543631 8.021553 7.119630 6.372859 5.748704 4.774634 9.371887 8.755625 8.201412 7.249670 6.467420 5.817848 4.812195 9.603599 8.905115 8.364920 7.365777 6.550369 5.877455 4.843496 9.818147 9.128546 8.513564 7.469444 6.623131 5.928841 4.869580

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions