**Present Value Tables for Financial Calculations**Understanding the present value of future cash flows is integral in many financial analyses and decision-making processes. Below are detailed tables that provide the factors required for calculating the present value (PV) of $1 and the present value of an annuity of $1 over various periods and discount rates. Utilizing these tables allows for the quick determination of present values without the need for intricate calculations.### Table 6.4: Factors for Calculating the Present Value of $1This table displays the factors necessary to compute the present value of a single dollar to be received in the future. These factors are indexed by the number of periods (up to 50) and the discount rate (from 2% to 20%).#### Explanation of Table Columns and Rows:- **No. of Periods**: Represents the number of time periods until the cash flow is received.- **Discount Rate**: This is the interest rate used to discount future cash flows to their present values. Rates are provided from 2% to 20%.For example, if you need to find the present value of $1 to be received in 10 periods with an 8% discount rate, locate the intersection of row 10 and the 8% column. The factor is **0.4632**.Values in the table decrease as either the number of periods increases (due to the longer duration) or the discount rate increases (reflecting a higher opportunity cost over time).### Table 6.5: Factors for Calculating the Present Value of an Annuity of $1This table is used for finding the present value of an annuity of $1—that is, a series of $1 payments made at the end of each period for a number of periods.#### Explanation of Table Columns and Rows:- **No. of Periods**: Represents the number of payment periods for the annuity.- **Discount Rate**: Similar to Table 6.4, this is the interest rate used to discount future annuity payments to their present value. Rates range from 2% to 20%.For example, to find the present value of an annuity of $1 over 15 periods at a discount rate of 10%, find the intersection of row 15 and the 10% column. The factor is **7.6061**.The values in this table also generally increase with the number of periods, reflecting the cumulative **Decision-Making in Capital Budgeting: A Case Study**### Cost Savings and Equipment Investment AnalysisLakeside Inc. is evaluating the replacement of its old production equipment with advanced technology. Key financial details for this investment analysis are as follows:- **Monthly Cost Savings**: $10,000- **Equipment Life**: 5 years- **Initial Cost**: $390,000- **Estimated Salvage Value**: $40,000- **Cost of Capital**: 10%Lakeside Inc. uses discount tables to calculate present values. Refer to the relevant tables:- **Table 6-4**: Contains present value factors for annuities.- **Table 6-5**: Contains present value factors for single sums.Ensure accuracy by rounding present value factors to 4 decimal places as instructed.### Required CalculationCalculate the present value ratio of the new production equipment. This ratio will assist Lakeside Inc. in determining the financial viability of the equipment upgrade. Be precise and round your answer to 2 decimal places.**Input Field:**- **Present Value Ratio**: [Input Box]By using this structured analysis approach, students and practitioners can gain a clear understanding of investment assessment in capital budgeting scenarios.

Annual cost savings = Monthly savings x 12 months = $10,000 x 12 = $120,000

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $390,000, with an estimated salvage value of $40,000. Lakeside's cost of capital is 10%. Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required: Calculate the present value ratio of the new production equipment. (Round your answer to 2 decimal places.) Present value ratio

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $390,000, with an estimated salvage value of $40,000. Lakeside's cost of capital is 10%. Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required: Calculate the present value ratio of the new production equipment. (Round your answer to 2 decimal places.) Present value ratio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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