Present Value of an Annuity Determine the present value of $180,000 to be received at the end of each of four years, using an interest rate of 10%, compounded annually, as follows: a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year Total present value 163,636 122,942 570,576 b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar. 570,576 c. Why is the present value of the four $180,000 cash receipts less than the $720,000 to be received in the future? The present value is less due to the compounding of interest over the 4 years. Present Value of an Annuity On January 1, you win $5,100,000 in the state lottery. The $5,100,000 prize will be paid in equal installments of $510,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31. If the current interest rate is 6%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar.. 3,753,644 X Feedback Check My W Review the time value of money concept. Recall that the time value of money concept recognizes that cash received today is worth more than the same amount of cash to be received in the future. Show Me How Cash Flows from Operating Activities-Indirect Method The net income reported on the income statement for the current year was $116,900. Depreciation recorded on store equipment for the year amounted to $19,300. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $45,940 $41,810 Accounts receivable (net) Inventories 32,940 30,900 44,980 47,040 Prepaid expenses 5,050 3,970 Accounts payable (merchandise creditors) 43,050 Wages payable 23,520 39,550 25,840 a. Prepare the "Cash flows from operating activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable Decrease in inventories Increase in prepaid expenses Check My Work 0000 eBook Show Me How End of Year Beginning of Year Cash $45,940 $41,810 Accounts receivable (net) 32,940 30,900 Inventories 44,980 47,040 Prepaid expenses 5,050 3,970 Accounts payable (merchandise creditors) 43,050 39,550 Wages payable 23,520 25,840 a. Prepare the "Cash flows from operating activities" section of the statement of cash flows, using the indirect method. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments. Statement of Cash Flows (partial) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation Changes in current operating assets and liabilities: Increase in accounts receivable Decrease in inventories Increase in prepaid expenses Increase in accounts payable Decrease in wages payable Net cash flow from operating activities 00000 0 0