(Time value of money calculations, LO 2) For each of the following situations, do the calculations necessary to make a decision:

a. An entity purchases equipment for $50,000. The entity pays $10,000 on the delivery date, $15,000 one year from the delivery date, and $25,000 two years from the delivery date. How much should the entity record as the cost of the equipment? The purchase agreement does not require that the entity pay interest.

b. A woman saving for her retirement invests $10,000 in a long-term investment certificate. The certificate pays 7% interest per year compounded annually for 20 years. How much money will the woman receive when she retires in 20 years?

c. An investment promises to pay investors $10,000 per year for 10 years. The first payment will be received one year from the date the investment is made. If an investor has a discount rate of 10%, what is the maximum amount that the investor should pay for the investment?

d. A company borrows $1,000,000 for five years from a group of lenders. The company does not have to pay interest each year but must pay the principal and interest back at the end of the loan term. Assuming an interest rate of 8%, how much will the company have to give the lenders when the loan comes due in five years?

e. Would you prefer to receive $14,000 today, $25,000 in five years, or $4,000 at the end of each of the next five years? Assume a discount rate of 12%.