1. Gordon Co., having recently issued a $1,000,000 bond, is committed to make annual sinking fund deposits of $75,000. The deposits are made on the last day of each year and yield a return of 6%. Will the fund at the end of 10 years be sufficient to retire the bonds? If not, what will the deficiency be?

2. LakeFront Co. is considering investing in a new dock that will cost $280,000. The company expects to use the dock for 5 years, after which it will be sold for $150,000 at that time. LakeFront anticipates cash flows of $50,000 resulting from the new dock. If the appropriate interest rate is 6%, would it be worth buying the dock?

3. Assume that JJ Inc. has a contractual debt outstanding with two options for settlement: (a) pay $3,500,000 today or (b) make annual payments of $400,000 for 15 years, with each payment due at the end of the year. Assuming an effective rate of 8%, which would you recommend?