a. Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 5% per year. What amount will the company receive at the time the lease expires?
a. Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 5% per year. What amount will the company receive at the time the lease expires?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 7MC: Using the information provided, what transaction represents the best application of the present...
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Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Question
![E6.6 (LO 2, 3, 4) (Future Value and Present Value Problems) Presented below are three unre-
lated situations.
a. Dwayne Wade Company recently signed a lease for a new office building, for a lease period of
10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be
returned at the expiration of the lease, with interest compounded at 5% per year. What amount will
the company receive at the time the lease expires?
b. Serena Williams Corporation, having recently issued a $20 million, 15-year bond issue, is committed
to make annual sinking fund deposits of $600,000. The deposits are made on the last day of each year
and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not,
what will the deficiency be?
c. Under the terms of his salary agreement, president Rex Walters has an option of receiving either an
immediate bonus of $55,000, or a deferred bonus of $70,000 payable in 10 years. Ignoring tax consider-
ations and assuming a relevant interest rate of 4%, which form of settlement should Walters accept?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8f0b0f2-ea3a-4ad5-a43a-b584eea1f738%2F2739721c-96b7-48e4-a5e5-2a5251e903dc%2F6j3b0d_processed.jpeg&w=3840&q=75)
Transcribed Image Text:E6.6 (LO 2, 3, 4) (Future Value and Present Value Problems) Presented below are three unre-
lated situations.
a. Dwayne Wade Company recently signed a lease for a new office building, for a lease period of
10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be
returned at the expiration of the lease, with interest compounded at 5% per year. What amount will
the company receive at the time the lease expires?
b. Serena Williams Corporation, having recently issued a $20 million, 15-year bond issue, is committed
to make annual sinking fund deposits of $600,000. The deposits are made on the last day of each year
and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not,
what will the deficiency be?
c. Under the terms of his salary agreement, president Rex Walters has an option of receiving either an
immediate bonus of $55,000, or a deferred bonus of $70,000 payable in 10 years. Ignoring tax consider-
ations and assuming a relevant interest rate of 4%, which form of settlement should Walters accept?
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