Solutions Manual - Financial
Accounting For Decision Makers, 1st
Edition by Wendy M. Tietz | Melissa
Larson
Appendix C
Time Value of Money
Short Exercises
(5-10 min.) C-S-1
(Learning Objective 1: Calculate present value of various amounts)
Calculate the present value of the following amounts:
1. $6,000 at the end of twenty years at 10%
2. $6,000 a year at the end of the next twenty years at 10%
Answer:
1. $6,000 × .149 (PV of $1, 20 periods, 10%) = $894
2. $6,000 × 8.514 (PV of an ordinary annuity, 20 periods, 10%) =
$51,084
Copyright © 2027 Appendix C Time Value of Money C-1
, (5-10 min.) C-S-2
(Learning Objective 1: Calculate the present value of an investment using
present-value tables) McGee Leasing leased a car to a customer. McGee
will receive $300 a month, at the end of each month, for 36 months. Use
the PV function in Excel to calculate the answers to the following
questions.
1. What is the present value of the lease if the annual interest rate in
the lease is 18%?
2. What is the present value of the lease if the car can likely be sold for
$6,000 at the end of three years?
Answer:
1. $8,298.21 EXCEL formula = PV(1.5%,36,-300)
2. $11,808.74 EXCEL formula = PV(1.5%,36,-300,-6000)
C-2 Financial Accounting for Decision Makers 1/e Solutions Manual Copyright © 2027
,Exercises
(5-10 min.) C-E-3A
(Learning Objective 1: Calculate the present value of a bond investment)
Haddock Corp. purchased fifteen $1,000 7% bonds of Galvan Corporation
when the market rate of interest was 8%. Interest is paid semiannually,
and the bonds will mature in nine years. Using the PV function in Excel,
calculate the price Haddock paid (the present value) for the bond
investment.
Answer:
$14,050.55 EXCEL formula =PV(4%,18,-525,-15000,0)
(5-10 min.) C-E-4B
(Learning Objective 1: Calculate the present value of a bond investment)
Hodson Corp. purchased ten $1,000 8% bonds of Eagle Corporation when
the market rate of interest was 6%. Interest is paid semiannually, and the
bonds will mature in four years. Using the PV function in Excel, calculate
the price Hodson paid (the present value) for the bond investment.
Answer:
$10,701.97 EXCEL formula =PV(3%,8,-400,-10000,0)
Copyright © 2027 Appendix C Time Value of Money C-3
, Quiz
Test your understanding of time value of money concepts by answering
the following questions. Select the best choice from among the possible
answers given.
C-Q-5
The present value of $3,000 at the end of seven years at 8% interest is
a. $2,228.
b. $1,749.
c. $3,000.
d. $15,618.
Answer:
B ($3,000 × .583)
C-Q-6
Which of the following is not needed to calculate the present value of an
investment?
a. The length of time between the investment and future receipt
b. The interest rate
c. The rate of inflation
d. The amount of the receipt
Answer:
C
C-Q-7
What is the present value of bonds with a face value of $6,000, a stated
interest rate of 7%, a market rate of 5%, and a maturity date three years
in the future? Interest is paid semiannually. Use Excel.
a. $5,614
b. $7,060
c. $6,000
d. $6,330
Answer:
C-4 Financial Accounting for Decision Makers 1/e Solutions Manual Copyright © 2027
Accounting For Decision Makers, 1st
Edition by Wendy M. Tietz | Melissa
Larson
Appendix C
Time Value of Money
Short Exercises
(5-10 min.) C-S-1
(Learning Objective 1: Calculate present value of various amounts)
Calculate the present value of the following amounts:
1. $6,000 at the end of twenty years at 10%
2. $6,000 a year at the end of the next twenty years at 10%
Answer:
1. $6,000 × .149 (PV of $1, 20 periods, 10%) = $894
2. $6,000 × 8.514 (PV of an ordinary annuity, 20 periods, 10%) =
$51,084
Copyright © 2027 Appendix C Time Value of Money C-1
, (5-10 min.) C-S-2
(Learning Objective 1: Calculate the present value of an investment using
present-value tables) McGee Leasing leased a car to a customer. McGee
will receive $300 a month, at the end of each month, for 36 months. Use
the PV function in Excel to calculate the answers to the following
questions.
1. What is the present value of the lease if the annual interest rate in
the lease is 18%?
2. What is the present value of the lease if the car can likely be sold for
$6,000 at the end of three years?
Answer:
1. $8,298.21 EXCEL formula = PV(1.5%,36,-300)
2. $11,808.74 EXCEL formula = PV(1.5%,36,-300,-6000)
C-2 Financial Accounting for Decision Makers 1/e Solutions Manual Copyright © 2027
,Exercises
(5-10 min.) C-E-3A
(Learning Objective 1: Calculate the present value of a bond investment)
Haddock Corp. purchased fifteen $1,000 7% bonds of Galvan Corporation
when the market rate of interest was 8%. Interest is paid semiannually,
and the bonds will mature in nine years. Using the PV function in Excel,
calculate the price Haddock paid (the present value) for the bond
investment.
Answer:
$14,050.55 EXCEL formula =PV(4%,18,-525,-15000,0)
(5-10 min.) C-E-4B
(Learning Objective 1: Calculate the present value of a bond investment)
Hodson Corp. purchased ten $1,000 8% bonds of Eagle Corporation when
the market rate of interest was 6%. Interest is paid semiannually, and the
bonds will mature in four years. Using the PV function in Excel, calculate
the price Hodson paid (the present value) for the bond investment.
Answer:
$10,701.97 EXCEL formula =PV(3%,8,-400,-10000,0)
Copyright © 2027 Appendix C Time Value of Money C-3
, Quiz
Test your understanding of time value of money concepts by answering
the following questions. Select the best choice from among the possible
answers given.
C-Q-5
The present value of $3,000 at the end of seven years at 8% interest is
a. $2,228.
b. $1,749.
c. $3,000.
d. $15,618.
Answer:
B ($3,000 × .583)
C-Q-6
Which of the following is not needed to calculate the present value of an
investment?
a. The length of time between the investment and future receipt
b. The interest rate
c. The rate of inflation
d. The amount of the receipt
Answer:
C
C-Q-7
What is the present value of bonds with a face value of $6,000, a stated
interest rate of 7%, a market rate of 5%, and a maturity date three years
in the future? Interest is paid semiannually. Use Excel.
a. $5,614
b. $7,060
c. $6,000
d. $6,330
Answer:
C-4 Financial Accounting for Decision Makers 1/e Solutions Manual Copyright © 2027
