Shamrock Inc wishes to lease machinery to Pharoah Company Pharoah wants the machinery for 4 years, although it has a useful life of 10 years The machinery has a fair value at the commencement of the lease of $40,000, and Shamrock expects the machinery to have a residual value at the end of the lease term of $28,000 However, Pharoah does not guarantee any part of the residual value Pharoah does expect that the residual value will be $38,000 instead of $28,000 What would be the amount of the annual rental payments Shamrock demands of Pharoah, assuming each payment will be made at the end of each year and Shamrock wishes to earn a rate of return on the lease of 5 (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e g 5,275 ) Click here to view factor tables 5 'VUVSF 7BMVF PG 'VUVSF 7BMVF PG B 4JOHMF 4VN FVFn i i n (n) Periods 2 21 2 3 4 5 6 1 1 02000 1 02500 1 03000 1 04000 1 05000 1 06000 2 1 04040 1 05063 1 06090 1 08160 1 10250 1 12360 3 1 06121 1 07689 1 09273 1 12486 1 15763 1 19102 4 1 08243 1 10381 1 12551 1 16986 1 21551 1 26248 5 1 10408 1 13141 1 15927 1 21665 1 27628 1 33823 6 1 12616 1 15969 1 19405 1 26532 1 34010 1 41852 7 1 14869 1 18869 1 22987 1 31593 1 40710 1 50363 8 1 17166 1 21840 1 26677 1 36857 1 47746 1 59385 9 1 19509 1 24886 1 30477 1 42331 1 55133 1 68948 10 1 21899 1 28008 1 34392 1 48024 1 62889 1 79085 11 1 24337 1 31209 1 38423 1 53945 1 71034 1 89830 12 1 26824 1 34489 1 42576 1 60103 1 79586 2 01220 13 1 29361 1 37851 1 46853 1 66507 1 88565 2 13293 14 1 31948 1 41297 1 51259 1 73168 1 97993 2 26090 15 1 34587 1 44830 1 55797 1 80094 2 07893 2 39656 16 1 37279 1 48451 1 60471 1 87298 2 18287 2 54035 17 1 40024 1 52162 1 65285 1 94790 2 29202 2 69277 18 1 42825 1 55966 1 70243 2 02582 2 40662 2 85434 19 1 45681 1 59865 1 75351 2 10685 2 52695 3 02560 20 1 48595 1 63862 1 80611 2 19112 2 65330 3 20714 21 1 51567 1 67958 1 86029 2 27877 2 78596 3 39956 22 1 54598 1 72157 1 91610 2 36992 2 92526 3 60354 23 1 57690 1 76461 1 97359 2 46472 3 07152 3 81975 24 1 60844 1 80873 2 03279 2 56330 3 22510 4 04893 25 1 64061 1 85394 2 09378 2 66584 3 38635 4 29187 26 1 67342 1 90029 2 15659 2 77247 3 55567 4 54938 27 1 70689 1 94780 2 22129 2 88337 3 73346 4 82235 28 1 74102 1 99650 2 28793 2 99870 3 92013 5 11169 29 1 77584 2 04641 2 35657 3 11865 4 11614 5 41839 30 1 81136 2 09757 2 42726 3 24340 4 32194 5 74349 31 1 84759 2 15001 2 50008 3 37313 4 53804 6 08810 32 1 88454 2 20376 2 57508 3 50806 4 76494 6 45339 33 1 92223 2 25885 2 65234 3 64838 5 00319 6 84059 34 1 96068 2 31532 2 73191 3 79432 5 25335 7 25103 35 1 99989 2 37321 2 81386 3 94609 5 51602 7 68609 36 2 03989 2 43254 2 89828 4 10393 5 79182 8 14725 37 2 08069 2 49335 2 98523 4 26809 6 08141 8 63609 38 2 12230 2 55568 3 07478 4 43881 6 38548 9 15425 39 2 16474 2 61957 3 16703 4 61637 6 70475 9 70351 40 2 20804 2 68506 3 26204 4 80102 7 03999 10 28572 c06AccountingAndTheTimeValueOfMoney indd Page 6 46 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 46 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Future Value of 1 6 47 TABLE 6 1 Future Value of 1 (n) 8 9 10 11 12 15 Periods 1 08000 1 09000 1 10000 1 11000 1 12000 1 15000 1 1 16640 1 18810 1 21000 1 23210 1 25440 1 32250 2 1 25971 1 29503 1 33100 1 36763 1 40493 1 52088 3 1 36049 1 41158 1 46410 1 51807 1 57352 1 74901 4 1 46933 1 53862 1 61051 1 68506 1 76234 2 01136 5 1 58687 1 67710 1 77156 1 87041 1 97382 2 31306 6 1 71382 1 82804 1 94872 2 07616 2 21068 2 66002 7 1 85093 1 99256 2 14359 2 30454 2 47596 3 05902 8 1 99900 2 17189 2 35795 2 55803 2 77308 3 51788 9 2 15892 2 36736 2 59374 2 83942 3 10585 4 04556 10 2 33164 2 58043 2 85312 3 15176 3 47855 4 65239 11 2 51817 2 81267 3 13843 3 49845 3 89598 5 35025 12 2 71962 3 06581 3 45227 3 88328 4 36349 6 15279 13 2 93719 3 34173 3 79750 4 31044 4 88711 7 07571 14 3 17217 3 64248 4 17725 4 78459 5 47357 8 13706 15 3 42594 3 97031 4 59497 5 31089 6 13039 9 35762 16 3 70002 4 32763 5 05447 5 89509 6 86604 10 76126 17 3 99602 4 71712 5 55992 6 54355 7 68997 12 37545 18 4 31570 5 14166 6 11591 7 26334 8 61276 14 23177 19 4 66096 5 60441 6 72750 8 06231 9 64629 16 36654 20 5 03383 6 10881 7 40025 8 94917 10 80385 18 82152 21 5 43654 6 65860 8 14028 9 93357 12 10031 21 64475 22 5 87146 7 25787 8 95430 11 02627 13 55235 24 89146 23 6 34118 7 91108 9 84973 12 23916 15 17863 28 62518 24 6 84847 8 62308 10 83471 13 58546 17 00000 32 91895 25 7 39635 9 39916 11 91818 15 07986 19 04007 37 85680 26 7 98806 10 24508 13 10999 16 73865 21 32488 43 53532 27 8 62711 11 16714 14 42099 18 57990 23 88387 50 06561 28 9 31727 12 17218 15 86309 20 62369 26 74993 57 57545 29 10 06266 13 26768 17 44940 22 89230 29 95992 66 21177 30 10 86767 14 46177 19 19434 25 41045 33 55511 76 14354 31 11 73708 15 76333 21 11378 28 20560 37 58173 87 56507 32 12 67605 17 18203 23 22515 31 30821 42 09153 100 69983 33 13 69013 18 72841 25 54767 34 75212 47 14252 115 80480 34 14 78534 20 41397 28 10244 38 57485 52 79962 133 17552 35 15 96817 22 25123 30 91268 42 81808 59 13557 153 15185 36 17 24563 24 25384 34 00395 47 52807 66 23184 176 12463 37 18 62528 26 43668 37 40434 52 75616 74 17966 202 54332 38 20 11530 28 81598 41 14479 58 55934 83 08122 232 92482 39 21 72452 31 40942 45 25926 65 00087 93 05097 267 86355 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 47 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 47 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 48 CHAPTER 6 Accounting and the Time Value of Money TABLE 6 2 Present Value of 1 (Present Value of a Single Sum) PVFn,i (1 i ) n (n) Periods 2 21 2 3 4 5 6 1 98039 97561 97087 96154 95238 94340 2 96117 95181 94260 92456 90703 89000 3 94232 92860 91514 88900 86384 83962 4 92385 90595 88849 85480 82270 79209 5 90573 88385 86261 82193 78353 74726 6 88797 86230 83748 79031 74622 70496 7 87056 84127 81309 75992 71068 66506 8 85349 82075 78941 73069 67684 62741 9 83676 80073 76642 70259 64461 59190 10 82035 78120 74409 67556 61391 55839 11 80426 76214 72242 64958 58468 52679 12 78849 74356 70138 62460 55684 49697 13 77303 72542 68095 60057 53032 46884 14 75788 70773 66112 57748 50507 44230 15 74301 69047 64186 55526 48102 41727 16 72845 67362 62317 53391 45811 39365 17 71416 65720 60502 51337 43630 37136 18 70016 64117 58739 49363 41552 35034 19 68643 62553 57029 47464 39573 33051 20 67297 61027 55368 45639 37689 31180 21 65978 59539 53755 43883 35894 29416 22 64684 58086 52189 42196 34185 27751 23 63416 56670 50669 40573 32557 26180 24 62172 55288 49193 39012 31007 24698 25 60953 53939 47761 37512 29530 23300 26 59758 52623 46369 36069 28124 21981 27 58586 51340 45019 34682 26785 20737 28 57437 50088 43708 33348 25509 19563 29 56311 48866 42435 32065 24295 18456 30 55207 47674 41199 30832 23138 17411 31 54125 46511 39999 29646 22036 16425 32 53063 45377 38834 28506 20987 15496 33 52023 44270 37703 27409 19987 14619 34 51003 43191 36604 26355 19035 13791 35 50003 42137 35538 25342 18129 13011 36 49022 41109 34503 24367 17266 12274 37 48061 40107 33498 23430 16444 11579 38 47119 39128 32523 22529 15661 10924 39 46195 38174 31575 21662 14915 10306 40 45289 37243 30656 20829 14205 09722 1 (1 i) n c06AccountingAndTheTimeValueOfMoney indd Page 6 48 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 48 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Present Value of 1 6 49 5 1SFTFOU 7BMVF PG (n) 8 9 10 11 12 15 Periods 92593 91743 90909 90090 89286 86957 1 85734 84168 82645 81162 79719 75614 2 79383 77218 75132 73119 71178 65752 3 73503 70843 68301 65873 63552 57175 4 68058 64993 62092 59345 56743 49718 5 63017 59627 56447 53464 50663 43233 6 58349 54703 51316 48166 45235 37594 7 54027 50187 46651 43393 40388 32690 8 50025 46043 42410 39092 36061 28426 9 46319 42241 38554 35218 32197 24719 10 42888 38753 35049 31728 28748 21494 11 39711 35554 31863 28584 25668 18691 12 36770 32618 28966 25751 22917 16253 13 34046 29925 26333 23199 20462 14133 14 31524 27454 23939 20900 18270 12289 15 29189 25187 21763 18829 16312 10687 16 27027 23107 19785 16963 14564 09293 17 25025 21199 17986 15282 13004 08081 18 23171 19449 16351 13768 11611 07027 19 21455 17843 14864 12403 10367 06110 20 19866 16370 13513 11174 09256 05313 21 18394 15018 12285 10067 08264 04620 22 17032 13778 11168 09069 07379 04017 23 15770 12641 10153 08170 06588 03493 24 14602 11597 09230 07361 05882 03038 25 13520 10639 08391 06631 05252 02642 26 12519 09761 07628 05974 04689 02297 27 11591 08955 06934 05382 04187 01997 28 10733 08216 06304 04849 03738 01737 29 09938 07537 05731 04368 03338 01510 30 09202 06915 05210 03935 02980 01313 31 08520 06344 04736 03545 02661 01142 32 07889 05820 04306 03194 02376 00993 33 07305 05340 03914 02878 02121 00864 34 06763 04899 03558 02592 01894 00751 35 06262 04494 03235 02335 01691 00653 36 05799 04123 02941 02104 01510 00568 37 05369 03783 02674 01896 01348 00494 38 04971 03470 02430 01708 01204 00429 39 04603 03184 02210 01538 01075 00373 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 49 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 49 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 50 CHAPTER 6 Accounting and the Time Value of Money 5 'VUVSF 7BMVF PG BO 0SEJOBSZ OOVJUZ PG FVF OAn,i (n) Periods 2 21 2 3 4 5 6 1 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 2 2 02000 2 02500 2 03000 2 04000 2 05000 2 06000 3 3 06040 3 07563 3 09090 3 12160 3 15250 3 18360 4 4 12161 4 15252 4 18363 4 24646 4 31013 4 37462 5 5 20404 5 25633 5 30914 5 41632 5 52563 5 63709 6 6 30812 6 38774 6 46841 6 63298 6 80191 6 97532 7 7 43428 7 54743 7 66246 7 89829 8 14201 8 39384 8 8 58297 8 73612 8 89234 9 21423 9 54911 9 89747 9 9 75463 9 95452 10 15911 10 58280 11 02656 11 49132 10 10 94972 11 20338 11 46338 12 00611 12 57789 13 18079 11 12 16872 12 48347 12 80780 13 48635 14 20679 14 97164 12 13 41209 13 79555 14 19203 15 02581 15 91713 16 86994 13 14 68033 15 14044 15 61779 16 62684 17 71298 18 88214 14 15 97394 16 51895 17 08632 18 29191 19 59863 21 01507 15 17 29342 17 93193 18 59891 20 02359 21 57856 23 27597 16 18 63929 19 38022 20 15688 21 82453 23 65749 25 67253 17 20 01207 20 86473 21 76159 23 69751 25 84037 28 21288 18 21 41231 22 38635 23 41444 25 64541 28 13238 30 90565 19 22 84056 23 94601 25 11687 27 67123 30 53900 33 75999 20 24 29737 25 54466 26 87037 29 77808 33 06595 36 78559 21 25 78332 27 18327 28 67649 31 96920 35 71925 39 99273 22 27 29898 28 86286 30 53678 34 24797 38 50521 43 39229 23 28 84496 30 58443 32 45288 36 61789 41 43048 46 99583 24 30 42186 32 34904 34 42647 39 08260 44 50200 50 81558 25 32 03030 34 15776 36 45926 41 64591 47 72710 54 86451 26 33 67091 36 01171 38 55304 44 31174 51 11345 59 15638 27 35 34432 37 91200 40 70963 47 08421 54 66913 63 70577 28 37 05121 39 85980 42 93092 49 96758 58 40258 68 52811 29 38 79223 41 85630 45 21885 52 96629 62 32271 73 63980 30 40 56808 43 90270 47 57542 56 08494 66 43885 79 05819 31 42 37944 46 00027 50 00268 59 32834 70 76079 84 80168 32 44 22703 48 15028 52 50276 62 70147 75 29883 90 88978 33 46 11157 50 35403 55 07784 66 20953 80 06377 97 34316 34 48 03380 52 61289 57 73018 69 85791 85 06696 104 18376 35 49 99448 54 92821 60 46208 73 65222 90 32031 111 43478 36 51 99437 57 30141 63 27594 77 59831 95 83632 119 12087 37 54 03425 59 73395 66 17422 81 70225 101 62814 127 26812 38 56 11494 62 22730 69 15945 85 97034 107 70955 135 90421 39 58 23724 64 78298 72 23423 90 40915 114 09502 145 05846 40 60 40198 67 40255 75 40126 95 02552 120 79977 154 76197 i n i c06AccountingAndTheTimeValueOfMoney indd Page 6 50 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 50 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Future Value of an Ordinary Annuity of 1 6 51 5 'VUVSF 7BMVF PG BO 0SEJOBSZ OOVJUZ PG (n) 8 9 10 11 12 15 Periods 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 2 08000 2 09000 2 10000 2 11000 2 12000 2 15000 2 3 24640 3 27810 3 31000 3 34210 3 37440 3 47250 3 4 50611 4 57313 4 64100 4 70973 4 77933 4 99338 4 5 86660 5 98471 6 10510 6 22780 6 35285 6 74238 5 7 33592 7 52334 7 71561 7 91286 8 11519 8 75374 6 8 92280 9 20044 9 48717 9 78327 10 08901 11 06680 7 10 63663 11 02847 11 43589 11 85943 12 29969 13 72682 8 12 48756 13 02104 13 57948 14 16397 14 77566 16 78584 9 14 48656 15 19293 15 93743 16 72201 17 54874 20 30372 10 16 64549 17 56029 18 53117 19 56143 20 65458 24 34928 11 18 97713 20 14072 21 38428 22 71319 24 13313 29 00167 12 21 49530 22 95339 24 52271 26 21164 28 02911 34 35192 13 24 21492 26 01919 27 97498 30 09492 32 39260 40 50471 14 27 15211 29 36092 31 77248 34 40536 37 27972 47 58041 15 30 32428 33 00340 35 94973 39 18995 42 75328 55 71747 16 33 75023 36 97371 40 54470 44 50084 48 88367 65 07509 17 37 45024 41 30134 45 59917 50 39593 55 74972 75 83636 18 41 44626 46 01846 51 15909 56 93949 63 43968 88 21181 19 45 76196 51 16012 57 27500 64 20283 72 05244 102 44358 20 50 42292 56 76453 64 00250 72 26514 81 69874 118 81012 21 55 45676 62 87334 71 40275 81 21431 92 50258 137 63164 22 60 89330 69 53194 79 54302 91 14788 104 60289 159 27638 23 66 76476 76 78981 88 49733 102 17415 118 15524 184 16784 24 73 10594 84 70090 98 34706 114 41331 133 33387 212 79302 25 79 95442 93 32398 109 18177 127 99877 150 33393 245 71197 26 87 35077 102 72314 121 09994 143 07864 169 37401 283 56877 27 95 33883 112 96822 134 20994 159 81729 190 69889 327 10408 28 103 96594 124 13536 148 63093 178 39719 214 58275 377 16969 29 113 28321 136 30754 164 49402 199 02088 241 33268 434 74515 30 123 34587 149 57522 181 94343 221 91317 271 29261 500 95692 31 134 21354 164 03699 201 13777 247 32362 304 84772 577 10046 32 145 95062 179 80032 222 25154 275 52922 342 42945 644 66553 33 158 62667 196 98234 245 47670 306 83744 384 52098 765 36535 34 172 31680 215 71076 271 02437 341 58955 431 66350 881 17016 35 187 10215 236 12472 299 12681 380 16441 484 46312 1014 34568 36 203 07032 258 37595 330 03949 422 98249 543 59869 1167 49753 37 220 31595 282 62978 364 04343 470 51056 609 83053 1343 62216 38 238 94122 309 06646 401 44778 523 26673 684 01020 1546 16549 39 259 05652 337 88245 442 59256 581 82607 767 09142 1779 09031 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 51 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 51 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 52 CHAPTER 6 Accounting and the Time Value of Money 5 1SFTFOU 7BMVF PG BO 0SEJOBSZ OOVJUZ PG PVF OAn,i (n) Periods 2 21 2 3 4 5 6 1 98039 97561 97087 96154 95238 94340 2 1 94156 1 92742 1 91347 1 88609 1 85941 1 83339 3 2 88388 2 85602 2 82861 2 77509 2 72325 2 67301 4 3 80773 3 76197 3 71710 3 62990 3 54595 3 46511 5 4 71346 4 64583 4 57971 4 45182 4 32948 4 21236 6 5 60143 5 50813 5 41719 5 24214 5 07569 4 91732 7 6 47199 6 34939 6 23028 6 00205 5 78637 5 58238 8 7 32548 7 17014 7 01969 6 73274 6 46321 6 20979 9 8 16224 7 97087 7 78611 7 43533 7 10782 6 80169 10 8 98259 8 75206 8 53020 8 11090 7 72173 7 36009 11 9 78685 9 51421 9 25262 8 76048 8 30641 7 88687 12 10 57534 10 25776 9 95400 9 38507 8 86325 8 38384 13 11 34837 10 98319 10 63496 9 98565 9 39357 8 85268 14 12 10625 11 69091 11 29607 10 56312 9 89864 9 29498 15 12 84926 12 38138 11 93794 11 11839 10 37966 9 71225 16 13 57771 13 05500 12 56110 11 65230 10 83777 10 10590 17 14 29187 13 71220 13 16612 12 16567 11 27407 10 47726 18 14 99203 14 35336 13 75351 12 65930 11 68959 10 82760 19 15 67846 14 97889 14 32380 13 13394 12 08532 11 15812 20 16 35143 15 58916 14 87747 13 59033 12 46221 11 46992 21 17 01121 16 18455 15 41502 14 02916 12 82115 11 76408 22 17 65805 16 76541 15 93692 14 45112 13 16300 12 04158 23 18 29220 17 33211 16 44361 14 85684 13 48857 12 30338 24 18 91393 17 88499 16 93554 15 24696 13 79864 12 55036 25 19 52346 18 42438 17 41315 15 62208 14 09394 12 78336 26 20 12104 18 95061 17 87684 15 98277 14 37519 13 00317 27 20 70690 19 46401 18 32703 16 32959 14 64303 13 21053 28 21 28127 19 96489 18 76411 16 66306 14 89813 13 40616 29 21 84438 20 45355 19 18845 16 98371 15 14107 13 59072 30 22 39646 20 93029 19 60044 17 29203 15 37245 13 76483 31 22 93770 21 39541 20 00043 17 58849 15 59281 13 92909 32 23 46833 21 84918 20 38877 17 87355 15 80268 14 08404 33 23 98856 22 29188 20 76579 18 14765 16 00255 14 23023 34 24 49859 22 72379 21 13184 18 41120 16 19290 14 36814 35 24 99862 23 14516 21 48722 18 66461 16 37419 14 49825 36 25 48884 23 55625 21 83225 18 90828 16 54685 14 62099 37 25 96945 23 95732 22 16724 19 14258 16 71129 14 73678 38 26 44064 24 34860 22 49246 19 36786 16 86789 14 84602 39 26 90259 24 73034 22 80822 19 58448 17 01704 14 94907 40 27 35548 25 10278 23 11477 19 79277 17 15909 15 04630 i n i c06AccountingAndTheTimeValueOfMoney indd Page 6 52 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 52 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Present Value of an Ordinary Annuity of 1 6 53 5 4 1SFTFOU7BMVFPGBO0SEJOBSZ OOVJUZPG (n) 8 9 10 11 12 15 Periods 92593 91743 90909 90090 89286 86957 1 1 78326 1 75911 1 73554 1 71252 1 69005 1 62571 2 2 57710 2 53130 2 48685 2 44371 2 40183 2 28323 3 3 31213 3 23972 3 16986 3 10245 3 03735 2 85498 4 3 99271 3 88965 3 79079 3 69590 3 60478 3 35216 5 4 62288 4 48592 4 35526 4 23054 4 11141 3 78448 6 5 20637 5 03295 4 86842 4 71220 4 56376 4 16042 7 5 74664 5 53482 5 33493 5 14612 4 96764 4 48732 8 6 24689 5 99525 5 75902 5 53705 5 32825 4 77158 9 6 71008 6 41766 6 14457 5 88923 5 65022 5 01877 10 7 13896 6 80519 6 49506 6 20652 5 93770 5 23371 11 7 53608 7 16073 6 81369 6 49236 6 19437 5 42062 12 7 90378 7 48690 7 10336 6 74987 6 42355 5 58315 13 8 24424 7 78615 7 36669 6 98187 6 62817 5 72448 14 8 55948 8 06069 7 60608 7 19087 6 81086 5 84737 15 8 85137 8 31256 7 82371 7 37916 6 97399 5 95424 16 9 12164 8 54363 8 02155 7 54879 7 11963 6 04716 17 9 37189 8 75563 8 20141 7 70162 7 24967 6 12797 18 9 60360 8 95012 8 36492 7 83929 7 36578 6 19823 19 9 81815 9 12855 8 51356 7 96333 7 46944 6 25933 20 10 01680 9 29224 8 64869 8 07507 7 56200 6 31246 21 10 20074 9 44243 8 77154 8 17574 7 64465 6 35866 22 10 37106 9 58021 8 88322 8 26643 7 71843 6 39884 23 10 52876 9 70661 8 98474 8 34814 7 78432 6 43377 24 10 67478 9 82258 9 07704 8 42174 7 84314 6 46415 25 10 80998 9 92897 9 16095 8 48806 7 89566 6 49056 26 10 93516 10 02658 9 23722 8 54780 7 94255 6 51353 27 11 05108 10 11613 9 30657 8 60162 7 98442 6 53351 28 11 15841 10 19828 9 36961 8 65011 8 02181 6 55088 29 11 25778 10 27365 9 42691 8 69379 8 05518 6 56598 30 11 34980 10 34280 9 47901 8 73315 8 08499 6 57911 31 11 43500 10 40624 9 52638 8 76860 8 11159 6 59053 32 11 51389 10 46444 9 56943 8 80054 8 13535 6 60046 33 11 58693 10 51784 9 60858 8 82932 8 15656 6 60910 34 11 65457 10 56682 9 64416 8 85524 8 17550 6 61661 35 11 71719 10 61176 9 67651 8 87859 8 19241 6 62314 36 11 77518 10 65299 9 70592 8 89963 8 20751 6 62882 37 11 82887 10 69082 9 73265 8 91859 8 22099 6 63375 38 11 87858 10 72552 9 75697 8 93567 8 23303 6 63805 39 11 92461 10 75736 9 77905 8 95105 8 24378 6 64178 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 53 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 53 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 54 CHAPTER 6 Accounting and the Time Value of Money 5 1SFTFOU 7BMVF PG BO OOVJUZ VF PG PVF ADn,i (n) Periods 2 21 2 3 4 5 6 1 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 2 1 98039 1 97561 1 97087 1 96154 1 95238 1 94340 3 2 94156 2 92742 2 91347 2 88609 2 85941 2 83339 4 3 88388 3 85602 3 82861 3 77509 3 72325 3 67301 5 4 80773 4 76197 4 71710 4 62990 4 54595 4 46511 6 5 71346 5 64583 5 57971 5 45182 5 32948 5 21236 7 6 60143 6 50813 6 41719 6 24214 6 07569 5 91732 8 7 47199 7 34939 7 23028 7 00205 6 78637 6 58238 9 8 32548 8 17014 8 01969 7 73274 7 46321 7 20979 10 9 16224 8 97087 8 78611 8 43533 8 10782 7 80169 11 9 98259 9 75206 9 53020 9 11090 8 72173 8 36009 12 10 78685 10 51421 10 25262 9 76048 9 30641 8 88687 13 11 57534 11 25776 10 95400 10 38507 9 86325 9 38384 14 12 34837 11 98319 11 63496 10 98565 10 39357 9 85268 15 13 10625 12 69091 12 29607 11 56312 10 89864 10 29498 16 13 84926 13 38138 12 93794 12 11839 11 37966 10 71225 17 14 57771 14 05500 13 56110 12 65230 11 83777 11 10590 18 15 29187 14 71220 14 16612 13 16567 12 27407 11 47726 19 15 99203 15 35336 14 75351 13 65930 12 68959 11 82760 20 16 67846 15 97889 15 32380 14 13394 13 08532 12 15812 21 17 35143 16 58916 15 87747 14 59033 13 46221 12 46992 22 18 01121 17 18455 16 41502 15 02916 13 82115 12 76408 23 18 65805 17 76541 16 93692 15 45112 14 16300 13 04158 24 19 29220 18 33211 17 44361 15 85684 14 48857 13 30338 25 19 91393 18 88499 17 93554 16 24696 14 79864 13 55036 26 20 52346 19 42438 18 41315 16 62208 15 09394 13 78336 27 21 12104 19 95061 18 87684 16 98277 15 37519 14 00317 28 21 70690 20 46401 19 32703 17 32959 15 64303 14 21053 29 22 28127 20 96489 19 76411 17 66306 15 89813 14 40616 30 22 84438 21 45355 20 18845 17 98371 16 14107 14 59072 31 23 39646 21 93029 20 60044 18 29203 16 37245 14 76483 32 23 93770 22 39541 21 00043 18 58849 16 59281 14 92909 33 24 46833 22 84918 21 38877 18 87355 16 80268 15 08404 34 24 98856 23 29188 21 76579 19 14765 17 00255 15 23023 35 25 49859 23 72379 22 13184 19 41120 17 19290 15 36814 36 25 99862 24 14516 22 48722 19 66461 17 37419 15 49825 37 26 48884 24 55625 22 83225 19 90828 17 54685 15 62099 38 26 96945 24 95732 23 16724 20 14258 17 71129 15 73678 39 27 44064 25 34860 23 49246 20 36786 17 86789 15 84602 40 27 90259 25 73034 23 80822 20 58448 18 01704 15 94907 i n i c06AccountingAndTheTimeValueOfMoney indd Page 6 54 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 54 03 12 18 12 48 PM f 0551 208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Present Value of an Annuity Due of 1 6 55 5 1SFTFOU7BMVFPGBO OOVJUZ VFPG (n) 8 9 10 11 12 15 Periods 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 1 92593 1 91743 1 90909 1 90090 1 89286 1 86957 2 2 78326 2 75911 2 73554 2 71252 2 69005 2 62571 3 3 57710 3 53130 3 48685 3 44371 3 40183 3 28323 4 4 31213 4 23972 4 16986 4 10245 4 03735 3 85498 5 4 99271 4 88965 4 79079 4 69590 4 60478 4 35216 6 5 62288 5 48592 5 35526 5 23054 5 11141 4 78448 7 6 20637 6 03295 5 86842 5 71220 5 56376 5 16042 8 6 74664 6 53482 6 33493 6 14612 5 96764 5 48732 9 7 24689 6 99525 6 75902 6 53705 6 32825 5 77158 10 7 71008 7 41766 7 14457 6 88923 6 65022 6 01877 11 8 13896 7 80519 7 49506 7 20652 6 93770 6 23371 12 8 53608 8 16073 7 81369 7 49236 7 19437 6 42062 13 8 90378 8 48690 8 10336 7 74987 7 42355 6 58315 14 9 24424 8 78615 8 36669 7 98187 7 62817 6 72448 15 9 55948 9 06069 8 60608 8 19087 7 81086 6 84737 16 9 85137 9 31256 8 82371 8 37916 7 97399 6 95424 17 10 12164 9 54363 9 02155 8 54879 8 11963 7 04716 18 10 37189 9 75563 9 20141 8 70162 8 24967 7 12797 19 10 60360 9 95012 9 36492 8 83929 8 36578 7 19823 20 10 81815 10 12855 9 51356 8 96333 8 46944 7 25933 21 11 01680 10 29224 9 64869 9 07507 8 56200 7 31246 22 11 20074 10 44243 9 77154 9 17574 8 64465 7 35866 23 11 37106 10 58021 9 88322 9 26643 8 71843 7 39884 24 11 52876 10 70661 9 98474 9 34814 8 78432 7 43377 25 11 67478 10 82258 10 07704 9 42174 8 84314 7 46415 26 11 80998 10 92897 10 16095 9 48806 8 89566 7 49056 27 11 93518 11 02658 10 23722 9 54780 8 94255 7 51353 28 12 05108 11 11613 10 30657 9 60162 8 98442 7 53351 29 12 15841 11 19828 10 36961 9 65011 9 02181 7 55088 30 12 25778 11 27365 10 42691 9 69379 9 05518 7 56598 31 12 34980 11 34280 10 47901 9 73315 9 08499 7 57911 32 12 43500 11 40624 10 52638 9 76860 9 11159 7 59053 33 12 51389 11 46444 10 56943 9 80054 9 13535 7 60046 34 12 58693 11 51784 10 60858 9 82932 9 15656 7 60910 35 12 65457 11 56682 10 64416 9 85524 9 17550 7 61661 36 12 71719 11 61176 10 67651 9 87859 9 19241 7 62314 37 12 77518 11 65299 10 70592 9 89963 9 20751 7 62882 38 12 82887 11 69082 10 73265 9 91859 9 22099 7 63375 39 12 87858 11 72552 10 75697 9 93567 9 23303 7 63805 40 Amount of equal annual lease payments $enter the amount of equal annual lease payments in dollars rounded to 0 decimal places

Question

Shamrock Inc  wishes to lease machinery to Pharoah Company  Pharoah wants the machinery for 4 years, although it has a useful life of 10 years  The machinery has a fair value at the commencement of the lease of $40,000, and Shamrock expects the machinery to have a residual value at the end of the lease term of $28,000  However, Pharoah does not guarantee any part of the residual value  Pharoah does expect that the residual value will be $38,000 instead of $28,000  What would be the amount of the annual rental payments Shamrock demands of Pharoah, assuming each payment will be made at the end of each year and Shamrock wishes to earn a rate of return on the lease of 5   (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e g  5,275 ) Click here to view factor tables  5     'VUVSF 7BMVF PG 'VUVSF 7BMVF PG B 4JOHMF 4VN FVFn i i n (n) Periods 2  21 2  3  4  5  6  1 1 02000 1 02500 1 03000 1 04000 1 05000 1 06000 2 1 04040 1 05063 1 06090 1 08160 1 10250 1 12360 3 1 06121 1 07689 1 09273 1 12486 1 15763 1 19102 4 1 08243 1 10381 1 12551 1 16986 1 21551 1 26248 5 1 10408 1 13141 1 15927 1 21665 1 27628 1 33823 6 1 12616 1 15969 1 19405 1 26532 1 34010 1 41852 7 1 14869 1 18869 1 22987 1 31593 1 40710 1 50363 8 1 17166 1 21840 1 26677 1 36857 1 47746 1 59385 9 1 19509 1 24886 1 30477 1 42331 1 55133 1 68948 10 1 21899 1 28008 1 34392 1 48024 1 62889 1 79085 11 1 24337 1 31209 1 38423 1 53945 1 71034 1 89830 12 1 26824 1 34489 1 42576 1 60103 1 79586 2 01220 13 1 29361 1 37851 1 46853 1 66507 1 88565 2 13293 14 1 31948 1 41297 1 51259 1 73168 1 97993 2 26090 15 1 34587 1 44830 1 55797 1 80094 2 07893 2 39656 16 1 37279 1 48451 1 60471 1 87298 2 18287 2 54035 17 1 40024 1 52162 1 65285 1 94790 2 29202 2 69277 18 1 42825 1 55966 1 70243 2 02582 2 40662 2 85434 19 1 45681 1 59865 1 75351 2 10685 2 52695 3 02560 20 1 48595 1 63862 1 80611 2 19112 2 65330 3 20714 21 1 51567 1 67958 1 86029 2 27877 2 78596 3 39956 22 1 54598 1 72157 1 91610 2 36992 2 92526 3 60354 23 1 57690 1 76461 1 97359 2 46472 3 07152 3 81975 24 1 60844 1 80873 2 03279 2 56330 3 22510 4 04893 25 1 64061 1 85394 2 09378 2 66584 3 38635 4 29187 26 1 67342 1 90029 2 15659 2 77247 3 55567 4 54938 27 1 70689 1 94780 2 22129 2 88337 3 73346 4 82235 28 1 74102 1 99650 2 28793 2 99870 3 92013 5 11169 29 1 77584 2 04641 2 35657 3 11865 4 11614 5 41839 30 1 81136 2 09757 2 42726 3 24340 4 32194 5 74349 31 1 84759 2 15001 2 50008 3 37313 4 53804 6 08810 32 1 88454 2 20376 2 57508 3 50806 4 76494 6 45339 33 1 92223 2 25885 2 65234 3 64838 5 00319 6 84059 34 1 96068 2 31532 2 73191 3 79432 5 25335 7 25103 35 1 99989 2 37321 2 81386 3 94609 5 51602 7 68609 36 2 03989 2 43254 2 89828 4 10393 5 79182 8 14725 37 2 08069 2 49335 2 98523 4 26809 6 08141 8 63609 38 2 12230 2 55568 3 07478 4 43881 6 38548 9 15425 39 2 16474 2 61957 3 16703 4 61637 6 70475 9 70351 40 2 20804 2 68506 3 26204 4 80102 7 03999 10 28572 c06AccountingAndTheTimeValueOfMoney indd Page 6 46 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 46 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Future Value of 1 6 47 TABLE 6 1 Future Value of 1 (n) 8  9  10  11  12  15  Periods 1 08000 1 09000 1 10000 1 11000 1 12000 1 15000 1 1 16640 1 18810 1 21000 1 23210 1 25440 1 32250 2 1 25971 1 29503 1 33100 1 36763 1 40493 1 52088 3 1 36049 1 41158 1 46410 1 51807 1 57352 1 74901 4 1 46933 1 53862 1 61051 1 68506 1 76234 2 01136 5 1 58687 1 67710 1 77156 1 87041 1 97382 2 31306 6 1 71382 1 82804 1 94872 2 07616 2 21068 2 66002 7 1 85093 1 99256 2 14359 2 30454 2 47596 3 05902 8 1 99900 2 17189 2 35795 2 55803 2 77308 3 51788 9 2 15892 2 36736 2 59374 2 83942 3 10585 4 04556 10 2 33164 2 58043 2 85312 3 15176 3 47855 4 65239 11 2 51817 2 81267 3 13843 3 49845 3 89598 5 35025 12 2 71962 3 06581 3 45227 3 88328 4 36349 6 15279 13 2 93719 3 34173 3 79750 4 31044 4 88711 7 07571 14 3 17217 3 64248 4 17725 4 78459 5 47357 8 13706 15 3 42594 3 97031 4 59497 5 31089 6 13039 9 35762 16 3 70002 4 32763 5 05447 5 89509 6 86604 10 76126 17 3 99602 4 71712 5 55992 6 54355 7 68997 12 37545 18 4 31570 5 14166 6 11591 7 26334 8 61276 14 23177 19 4 66096 5 60441 6 72750 8 06231 9 64629 16 36654 20 5 03383 6 10881 7 40025 8 94917 10 80385 18 82152 21 5 43654 6 65860 8 14028 9 93357 12 10031 21 64475 22 5 87146 7 25787 8 95430 11 02627 13 55235 24 89146 23 6 34118 7 91108 9 84973 12 23916 15 17863 28 62518 24 6 84847 8 62308 10 83471 13 58546 17 00000 32 91895 25 7 39635 9 39916 11 91818 15 07986 19 04007 37 85680 26 7 98806 10 24508 13 10999 16 73865 21 32488 43 53532 27 8 62711 11 16714 14 42099 18 57990 23 88387 50 06561 28 9 31727 12 17218 15 86309 20 62369 26 74993 57 57545 29 10 06266 13 26768 17 44940 22 89230 29 95992 66 21177 30 10 86767 14 46177 19 19434 25 41045 33 55511 76 14354 31 11 73708 15 76333 21 11378 28 20560 37 58173 87 56507 32 12 67605 17 18203 23 22515 31 30821 42 09153 100 69983 33 13 69013 18 72841 25 54767 34 75212 47 14252 115 80480 34 14 78534 20 41397 28 10244 38 57485 52 79962 133 17552 35 15 96817 22 25123 30 91268 42 81808 59 13557 153 15185 36 17 24563 24 25384 34 00395 47 52807 66 23184 176 12463 37 18 62528 26 43668 37 40434 52 75616 74 17966 202 54332 38 20 11530 28 81598 41 14479 58 55934 83 08122 232 92482 39 21 72452 31 40942 45 25926 65 00087 93 05097 267 86355 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 47 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 47 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 48 CHAPTER 6 Accounting and the Time Value of Money TABLE 6 2 Present Value of 1 (Present Value of a Single Sum) PVFn,i (1 i ) n (n) Periods 2  21 2  3  4  5  6  1  98039  97561  97087  96154  95238  94340 2  96117  95181  94260  92456  90703  89000 3  94232  92860  91514  88900  86384  83962 4  92385  90595  88849  85480  82270  79209 5  90573  88385  86261  82193  78353  74726 6  88797  86230  83748  79031  74622  70496 7  87056  84127  81309  75992  71068  66506 8  85349  82075  78941  73069  67684  62741 9  83676  80073  76642  70259  64461  59190 10  82035  78120  74409  67556  61391  55839 11  80426  76214  72242  64958  58468  52679 12  78849  74356  70138  62460  55684  49697 13  77303  72542  68095  60057  53032  46884 14  75788  70773  66112  57748  50507  44230 15  74301  69047  64186  55526  48102  41727 16  72845  67362  62317  53391  45811  39365 17  71416  65720  60502  51337  43630  37136 18  70016  64117  58739  49363  41552  35034 19  68643  62553  57029  47464  39573  33051 20  67297  61027  55368  45639  37689  31180 21  65978  59539  53755  43883  35894  29416 22  64684  58086  52189  42196  34185  27751 23  63416  56670  50669  40573  32557  26180 24  62172  55288  49193  39012  31007  24698 25  60953  53939  47761  37512  29530  23300 26  59758  52623  46369  36069  28124  21981 27  58586  51340  45019  34682  26785  20737 28  57437  50088  43708  33348  25509  19563 29  56311  48866  42435  32065  24295  18456 30  55207  47674  41199  30832  23138  17411 31  54125  46511  39999  29646  22036  16425 32  53063  45377  38834  28506  20987  15496 33  52023  44270  37703  27409  19987  14619 34  51003  43191  36604  26355  19035  13791 35  50003  42137  35538  25342  18129  13011 36  49022  41109  34503  24367  17266  12274 37  48061  40107  33498  23430  16444  11579 38  47119  39128  32523  22529  15661  10924 39  46195  38174  31575  21662  14915  10306 40  45289  37243  30656  20829  14205  09722 1 (1 i) n c06AccountingAndTheTimeValueOfMoney indd Page 6 48 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 48 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Present Value of 1 6 49 5     1SFTFOU 7BMVF PG (n) 8  9  10  11  12  15  Periods  92593  91743  90909  90090  89286  86957 1  85734  84168  82645  81162  79719  75614 2  79383  77218  75132  73119  71178  65752 3  73503  70843  68301  65873  63552  57175 4  68058  64993  62092  59345  56743  49718 5  63017  59627  56447  53464  50663  43233 6  58349  54703  51316  48166  45235  37594 7  54027  50187  46651  43393  40388  32690 8  50025  46043  42410  39092  36061  28426 9  46319  42241  38554  35218  32197  24719 10  42888  38753  35049  31728  28748  21494 11  39711  35554  31863  28584  25668  18691 12  36770  32618  28966  25751  22917  16253 13  34046  29925  26333  23199  20462  14133 14  31524  27454  23939  20900  18270  12289 15  29189  25187  21763  18829  16312  10687 16  27027  23107  19785  16963  14564  09293 17  25025  21199  17986  15282  13004  08081 18  23171  19449  16351  13768  11611  07027 19  21455  17843  14864  12403  10367  06110 20  19866  16370  13513  11174  09256  05313 21  18394  15018  12285  10067  08264  04620 22  17032  13778  11168  09069  07379  04017 23  15770  12641  10153  08170  06588  03493 24  14602  11597  09230  07361  05882  03038 25  13520  10639  08391  06631  05252  02642 26  12519  09761  07628  05974  04689  02297 27  11591  08955  06934  05382  04187  01997 28  10733  08216  06304  04849  03738  01737 29  09938  07537  05731  04368  03338  01510 30  09202  06915  05210  03935  02980  01313 31  08520  06344  04736  03545  02661  01142 32  07889  05820  04306  03194  02376  00993 33  07305  05340  03914  02878  02121  00864 34  06763  04899  03558  02592  01894  00751 35  06262  04494  03235  02335  01691  00653 36  05799  04123  02941  02104  01510  00568 37  05369  03783  02674  01896  01348  00494 38  04971  03470  02430  01708  01204  00429 39  04603  03184  02210  01538  01075  00373 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 49 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 49 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 50 CHAPTER 6 Accounting and the Time Value of Money 5     'VUVSF 7BMVF PG BO 0SEJOBSZ  OOVJUZ PG FVF OAn,i (n) Periods 2  21 2  3  4  5  6  1 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 2 2 02000 2 02500 2 03000 2 04000 2 05000 2 06000 3 3 06040 3 07563 3 09090 3 12160 3 15250 3 18360 4 4 12161 4 15252 4 18363 4 24646 4 31013 4 37462 5 5 20404 5 25633 5 30914 5 41632 5 52563 5 63709 6 6 30812 6 38774 6 46841 6 63298 6 80191 6 97532 7 7 43428 7 54743 7 66246 7 89829 8 14201 8 39384 8 8 58297 8 73612 8 89234 9 21423 9 54911 9 89747 9 9 75463 9 95452 10 15911 10 58280 11 02656 11 49132 10 10 94972 11 20338 11 46338 12 00611 12 57789 13 18079 11 12 16872 12 48347 12 80780 13 48635 14 20679 14 97164 12 13 41209 13 79555 14 19203 15 02581 15 91713 16 86994 13 14 68033 15 14044 15 61779 16 62684 17 71298 18 88214 14 15 97394 16 51895 17 08632 18 29191 19 59863 21 01507 15 17 29342 17 93193 18 59891 20 02359 21 57856 23 27597 16 18 63929 19 38022 20 15688 21 82453 23 65749 25 67253 17 20 01207 20 86473 21 76159 23 69751 25 84037 28 21288 18 21 41231 22 38635 23 41444 25 64541 28 13238 30 90565 19 22 84056 23 94601 25 11687 27 67123 30 53900 33 75999 20 24 29737 25 54466 26 87037 29 77808 33 06595 36 78559 21 25 78332 27 18327 28 67649 31 96920 35 71925 39 99273 22 27 29898 28 86286 30 53678 34 24797 38 50521 43 39229 23 28 84496 30 58443 32 45288 36 61789 41 43048 46 99583 24 30 42186 32 34904 34 42647 39 08260 44 50200 50 81558 25 32 03030 34 15776 36 45926 41 64591 47 72710 54 86451 26 33 67091 36 01171 38 55304 44 31174 51 11345 59 15638 27 35 34432 37 91200 40 70963 47 08421 54 66913 63 70577 28 37 05121 39 85980 42 93092 49 96758 58 40258 68 52811 29 38 79223 41 85630 45 21885 52 96629 62 32271 73 63980 30 40 56808 43 90270 47 57542 56 08494 66 43885 79 05819 31 42 37944 46 00027 50 00268 59 32834 70 76079 84 80168 32 44 22703 48 15028 52 50276 62 70147 75 29883 90 88978 33 46 11157 50 35403 55 07784 66 20953 80 06377 97 34316 34 48 03380 52 61289 57 73018 69 85791 85 06696 104 18376 35 49 99448 54 92821 60 46208 73 65222 90 32031 111 43478 36 51 99437 57 30141 63 27594 77 59831 95 83632 119 12087 37 54 03425 59 73395 66 17422 81 70225 101 62814 127 26812 38 56 11494 62 22730 69 15945 85 97034 107 70955 135 90421 39 58 23724 64 78298 72 23423 90 40915 114 09502 145 05846 40 60 40198 67 40255 75 40126 95 02552 120 79977 154 76197 i n i c06AccountingAndTheTimeValueOfMoney indd Page 6 50 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 50 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Future Value of an Ordinary Annuity of 1 6 51 5     'VUVSF 7BMVF PG BO 0SEJOBSZ  OOVJUZ PG (n) 8  9  10  11  12  15  Periods 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 2 08000 2 09000 2 10000 2 11000 2 12000 2 15000 2 3 24640 3 27810 3 31000 3 34210 3 37440 3 47250 3 4 50611 4 57313 4 64100 4 70973 4 77933 4 99338 4 5 86660 5 98471 6 10510 6 22780 6 35285 6 74238 5 7 33592 7 52334 7 71561 7 91286 8 11519 8 75374 6 8 92280 9 20044 9 48717 9 78327 10 08901 11 06680 7 10 63663 11 02847 11 43589 11 85943 12 29969 13 72682 8 12 48756 13 02104 13 57948 14 16397 14 77566 16 78584 9 14 48656 15 19293 15 93743 16 72201 17 54874 20 30372 10 16 64549 17 56029 18 53117 19 56143 20 65458 24 34928 11 18 97713 20 14072 21 38428 22 71319 24 13313 29 00167 12 21 49530 22 95339 24 52271 26 21164 28 02911 34 35192 13 24 21492 26 01919 27 97498 30 09492 32 39260 40 50471 14 27 15211 29 36092 31 77248 34 40536 37 27972 47 58041 15 30 32428 33 00340 35 94973 39 18995 42 75328 55 71747 16 33 75023 36 97371 40 54470 44 50084 48 88367 65 07509 17 37 45024 41 30134 45 59917 50 39593 55 74972 75 83636 18 41 44626 46 01846 51 15909 56 93949 63 43968 88 21181 19 45 76196 51 16012 57 27500 64 20283 72 05244 102 44358 20 50 42292 56 76453 64 00250 72 26514 81 69874 118 81012 21 55 45676 62 87334 71 40275 81 21431 92 50258 137 63164 22 60 89330 69 53194 79 54302 91 14788 104 60289 159 27638 23 66 76476 76 78981 88 49733 102 17415 118 15524 184 16784 24 73 10594 84 70090 98 34706 114 41331 133 33387 212 79302 25 79 95442 93 32398 109 18177 127 99877 150 33393 245 71197 26 87 35077 102 72314 121 09994 143 07864 169 37401 283 56877 27 95 33883 112 96822 134 20994 159 81729 190 69889 327 10408 28 103 96594 124 13536 148 63093 178 39719 214 58275 377 16969 29 113 28321 136 30754 164 49402 199 02088 241 33268 434 74515 30 123 34587 149 57522 181 94343 221 91317 271 29261 500 95692 31 134 21354 164 03699 201 13777 247 32362 304 84772 577 10046 32 145 95062 179 80032 222 25154 275 52922 342 42945 644 66553 33 158 62667 196 98234 245 47670 306 83744 384 52098 765 36535 34 172 31680 215 71076 271 02437 341 58955 431 66350 881 17016 35 187 10215 236 12472 299 12681 380 16441 484 46312 1014 34568 36 203 07032 258 37595 330 03949 422 98249 543 59869 1167 49753 37 220 31595 282 62978 364 04343 470 51056 609 83053 1343 62216 38 238 94122 309 06646 401 44778 523 26673 684 01020 1546 16549 39 259 05652 337 88245 442 59256 581 82607 767 09142 1779 09031 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 51 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 51 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 52 CHAPTER 6 Accounting and the Time Value of Money 5     1SFTFOU 7BMVF PG BO 0SEJOBSZ  OOVJUZ PG PVF OAn,i (n) Periods 2  21 2  3  4  5  6  1  98039  97561  97087  96154  95238  94340 2 1 94156 1 92742 1 91347 1 88609 1 85941 1 83339 3 2 88388 2 85602 2 82861 2 77509 2 72325 2 67301 4 3 80773 3 76197 3 71710 3 62990 3 54595 3 46511 5 4 71346 4 64583 4 57971 4 45182 4 32948 4 21236 6 5 60143 5 50813 5 41719 5 24214 5 07569 4 91732 7 6 47199 6 34939 6 23028 6 00205 5 78637 5 58238 8 7 32548 7 17014 7 01969 6 73274 6 46321 6 20979 9 8 16224 7 97087 7 78611 7 43533 7 10782 6 80169 10 8 98259 8 75206 8 53020 8 11090 7 72173 7 36009 11 9 78685 9 51421 9 25262 8 76048 8 30641 7 88687 12 10 57534 10 25776 9 95400 9 38507 8 86325 8 38384 13 11 34837 10 98319 10 63496 9 98565 9 39357 8 85268 14 12 10625 11 69091 11 29607 10 56312 9 89864 9 29498 15 12 84926 12 38138 11 93794 11 11839 10 37966 9 71225 16 13 57771 13 05500 12 56110 11 65230 10 83777 10 10590 17 14 29187 13 71220 13 16612 12 16567 11 27407 10 47726 18 14 99203 14 35336 13 75351 12 65930 11 68959 10 82760 19 15 67846 14 97889 14 32380 13 13394 12 08532 11 15812 20 16 35143 15 58916 14 87747 13 59033 12 46221 11 46992 21 17 01121 16 18455 15 41502 14 02916 12 82115 11 76408 22 17 65805 16 76541 15 93692 14 45112 13 16300 12 04158 23 18 29220 17 33211 16 44361 14 85684 13 48857 12 30338 24 18 91393 17 88499 16 93554 15 24696 13 79864 12 55036 25 19 52346 18 42438 17 41315 15 62208 14 09394 12 78336 26 20 12104 18 95061 17 87684 15 98277 14 37519 13 00317 27 20 70690 19 46401 18 32703 16 32959 14 64303 13 21053 28 21 28127 19 96489 18 76411 16 66306 14 89813 13 40616 29 21 84438 20 45355 19 18845 16 98371 15 14107 13 59072 30 22 39646 20 93029 19 60044 17 29203 15 37245 13 76483 31 22 93770 21 39541 20 00043 17 58849 15 59281 13 92909 32 23 46833 21 84918 20 38877 17 87355 15 80268 14 08404 33 23 98856 22 29188 20 76579 18 14765 16 00255 14 23023 34 24 49859 22 72379 21 13184 18 41120 16 19290 14 36814 35 24 99862 23 14516 21 48722 18 66461 16 37419 14 49825 36 25 48884 23 55625 21 83225 18 90828 16 54685 14 62099 37 25 96945 23 95732 22 16724 19 14258 16 71129 14 73678 38 26 44064 24 34860 22 49246 19 36786 16 86789 14 84602 39 26 90259 24 73034 22 80822 19 58448 17 01704 14 94907 40 27 35548 25 10278 23 11477 19 79277 17 15909 15 04630 i n i c06AccountingAndTheTimeValueOfMoney indd Page 6 52 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 52 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Present Value of an Ordinary Annuity of 1 6 53 5    4 1SFTFOU7BMVFPGBO0SEJOBSZ OOVJUZPG (n) 8  9  10  11  12  15  Periods  92593  91743  90909  90090  89286  86957 1 1 78326 1 75911 1 73554 1 71252 1 69005 1 62571 2 2 57710 2 53130 2 48685 2 44371 2 40183 2 28323 3 3 31213 3 23972 3 16986 3 10245 3 03735 2 85498 4 3 99271 3 88965 3 79079 3 69590 3 60478 3 35216 5 4 62288 4 48592 4 35526 4 23054 4 11141 3 78448 6 5 20637 5 03295 4 86842 4 71220 4 56376 4 16042 7 5 74664 5 53482 5 33493 5 14612 4 96764 4 48732 8 6 24689 5 99525 5 75902 5 53705 5 32825 4 77158 9 6 71008 6 41766 6 14457 5 88923 5 65022 5 01877 10 7 13896 6 80519 6 49506 6 20652 5 93770 5 23371 11 7 53608 7 16073 6 81369 6 49236 6 19437 5 42062 12 7 90378 7 48690 7 10336 6 74987 6 42355 5 58315 13 8 24424 7 78615 7 36669 6 98187 6 62817 5 72448 14 8 55948 8 06069 7 60608 7 19087 6 81086 5 84737 15 8 85137 8 31256 7 82371 7 37916 6 97399 5 95424 16 9 12164 8 54363 8 02155 7 54879 7 11963 6 04716 17 9 37189 8 75563 8 20141 7 70162 7 24967 6 12797 18 9 60360 8 95012 8 36492 7 83929 7 36578 6 19823 19 9 81815 9 12855 8 51356 7 96333 7 46944 6 25933 20 10 01680 9 29224 8 64869 8 07507 7 56200 6 31246 21 10 20074 9 44243 8 77154 8 17574 7 64465 6 35866 22 10 37106 9 58021 8 88322 8 26643 7 71843 6 39884 23 10 52876 9 70661 8 98474 8 34814 7 78432 6 43377 24 10 67478 9 82258 9 07704 8 42174 7 84314 6 46415 25 10 80998 9 92897 9 16095 8 48806 7 89566 6 49056 26 10 93516 10 02658 9 23722 8 54780 7 94255 6 51353 27 11 05108 10 11613 9 30657 8 60162 7 98442 6 53351 28 11 15841 10 19828 9 36961 8 65011 8 02181 6 55088 29 11 25778 10 27365 9 42691 8 69379 8 05518 6 56598 30 11 34980 10 34280 9 47901 8 73315 8 08499 6 57911 31 11 43500 10 40624 9 52638 8 76860 8 11159 6 59053 32 11 51389 10 46444 9 56943 8 80054 8 13535 6 60046 33 11 58693 10 51784 9 60858 8 82932 8 15656 6 60910 34 11 65457 10 56682 9 64416 8 85524 8 17550 6 61661 35 11 71719 10 61176 9 67651 8 87859 8 19241 6 62314 36 11 77518 10 65299 9 70592 8 89963 8 20751 6 62882 37 11 82887 10 69082 9 73265 8 91859 8 22099 6 63375 38 11 87858 10 72552 9 75697 8 93567 8 23303 6 63805 39 11 92461 10 75736 9 77905 8 95105 8 24378 6 64178 40 c06AccountingAndTheTimeValueOfMoney indd Page 6 53 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 53 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s 6 54 CHAPTER 6 Accounting and the Time Value of Money 5     1SFTFOU 7BMVF PG BO  OOVJUZ  VF PG PVF ADn,i (n) Periods 2  21 2  3  4  5  6  1 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 2 1 98039 1 97561 1 97087 1 96154 1 95238 1 94340 3 2 94156 2 92742 2 91347 2 88609 2 85941 2 83339 4 3 88388 3 85602 3 82861 3 77509 3 72325 3 67301 5 4 80773 4 76197 4 71710 4 62990 4 54595 4 46511 6 5 71346 5 64583 5 57971 5 45182 5 32948 5 21236 7 6 60143 6 50813 6 41719 6 24214 6 07569 5 91732 8 7 47199 7 34939 7 23028 7 00205 6 78637 6 58238 9 8 32548 8 17014 8 01969 7 73274 7 46321 7 20979 10 9 16224 8 97087 8 78611 8 43533 8 10782 7 80169 11 9 98259 9 75206 9 53020 9 11090 8 72173 8 36009 12 10 78685 10 51421 10 25262 9 76048 9 30641 8 88687 13 11 57534 11 25776 10 95400 10 38507 9 86325 9 38384 14 12 34837 11 98319 11 63496 10 98565 10 39357 9 85268 15 13 10625 12 69091 12 29607 11 56312 10 89864 10 29498 16 13 84926 13 38138 12 93794 12 11839 11 37966 10 71225 17 14 57771 14 05500 13 56110 12 65230 11 83777 11 10590 18 15 29187 14 71220 14 16612 13 16567 12 27407 11 47726 19 15 99203 15 35336 14 75351 13 65930 12 68959 11 82760 20 16 67846 15 97889 15 32380 14 13394 13 08532 12 15812 21 17 35143 16 58916 15 87747 14 59033 13 46221 12 46992 22 18 01121 17 18455 16 41502 15 02916 13 82115 12 76408 23 18 65805 17 76541 16 93692 15 45112 14 16300 13 04158 24 19 29220 18 33211 17 44361 15 85684 14 48857 13 30338 25 19 91393 18 88499 17 93554 16 24696 14 79864 13 55036 26 20 52346 19 42438 18 41315 16 62208 15 09394 13 78336 27 21 12104 19 95061 18 87684 16 98277 15 37519 14 00317 28 21 70690 20 46401 19 32703 17 32959 15 64303 14 21053 29 22 28127 20 96489 19 76411 17 66306 15 89813 14 40616 30 22 84438 21 45355 20 18845 17 98371 16 14107 14 59072 31 23 39646 21 93029 20 60044 18 29203 16 37245 14 76483 32 23 93770 22 39541 21 00043 18 58849 16 59281 14 92909 33 24 46833 22 84918 21 38877 18 87355 16 80268 15 08404 34 24 98856 23 29188 21 76579 19 14765 17 00255 15 23023 35 25 49859 23 72379 22 13184 19 41120 17 19290 15 36814 36 25 99862 24 14516 22 48722 19 66461 17 37419 15 49825 37 26 48884 24 55625 22 83225 19 90828 17 54685 15 62099 38 26 96945 24 95732 23 16724 20 14258 17 71129 15 73678 39 27 44064 25 34860 23 49246 20 36786 17 86789 15 84602 40 27 90259 25 73034 23 80822 20 58448 18 01704 15 94907 i n i c06AccountingAndTheTimeValueOfMoney indd Page 6 54 03 12 18 12 48 PM f 0551 06AccountingAndTheTimeValueOfMoney indd Page 6 54 03 12 18 12 48 PM f 0551  208 WB02413 9781119503705 ch06 text s 208 WB02413 9781119503705 ch06 text s Present Value of an Annuity Due of 1 6 55 5     1SFTFOU7BMVFPGBO OOVJUZ VFPG (n) 8  9  10  11  12  15  Periods 1 00000 1 00000 1 00000 1 00000 1 00000 1 00000 1 1 92593 1 91743 1 90909 1 90090 1 89286 1 86957 2 2 78326 2 75911 2 73554 2 71252 2 69005 2 62571 3 3 57710 3 53130 3 48685 3 44371 3 40183 3 28323 4 4 31213 4 23972 4 16986 4 10245 4 03735 3 85498 5 4 99271 4 88965 4 79079 4 69590 4 60478 4 35216 6 5 62288 5 48592 5 35526 5 23054 5 11141 4 78448 7 6 20637 6 03295 5 86842 5 71220 5 56376 5 16042 8 6 74664 6 53482 6 33493 6 14612 5 96764 5 48732 9 7 24689 6 99525 6 75902 6 53705 6 32825 5 77158 10 7 71008 7 41766 7 14457 6 88923 6 65022 6 01877 11 8 13896 7 80519 7 49506 7 20652 6 93770 6 23371 12 8 53608 8 16073 7 81369 7 49236 7 19437 6 42062 13 8 90378 8 48690 8 10336 7 74987 7 42355 6 58315 14 9 24424 8 78615 8 36669 7 98187 7 62817 6 72448 15 9 55948 9 06069 8 60608 8 19087 7 81086 6 84737 16 9 85137 9 31256 8 82371 8 37916 7 97399 6 95424 17 10 12164 9 54363 9 02155 8 54879 8 11963 7 04716 18 10 37189 9 75563 9 20141 8 70162 8 24967 7 12797 19 10 60360 9 95012 9 36492 8 83929 8 36578 7 19823 20 10 81815 10 12855 9 51356 8 96333 8 46944 7 25933 21 11 01680 10 29224 9 64869 9 07507 8 56200 7 31246 22 11 20074 10 44243 9 77154 9 17574 8 64465 7 35866 23 11 37106  10 58021 9 88322 9 26643 8 71843 7 39884 24 11 52876 10 70661 9 98474 9 34814 8 78432 7 43377 25 11 67478 10 82258 10 07704 9 42174 8 84314 7 46415 26 11 80998 10 92897 10 16095 9 48806 8 89566 7 49056 27 11 93518 11 02658 10 23722 9 54780 8 94255 7 51353 28 12 05108 11 11613 10 30657 9 60162 8 98442 7 53351 29 12 15841 11 19828 10 36961 9 65011 9 02181 7 55088 30 12 25778 11 27365 10 42691 9 69379 9 05518 7 56598 31 12 34980 11 34280 10 47901 9 73315 9 08499 7 57911 32 12 43500 11 40624 10 52638 9 76860 9 11159 7 59053 33 12 51389 11 46444 10 56943 9 80054 9 13535 7 60046 34 12 58693 11 51784 10 60858 9 82932 9 15656 7 60910 35 12 65457 11 56682 10 64416 9 85524 9 17550 7 61661 36 12 71719 11 61176 10 67651 9 87859 9 19241 7 62314 37 12 77518 11 65299 10 70592 9 89963 9 20751 7 62882 38 12 82887 11 69082 10 73265 9 91859 9 22099 7 63375 39 12 87858 11 72552 10 75697 9 93567 9 23303 7 63805 40 Amount of equal annual lease payments $enter the amount of equal annual lease payments in dollars rounded to 0 decimal places

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Question

Shamrock Inc. wishes to lease machinery to Pharoah Company. Pharoah wants the machinery for 4 years, although it has a useful life of 10 years.

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