## Present Value of an Annuity of $1 (Table 13-2)### OverviewThis table displays the present value of an annuity of $1, given different interest rates and time periods. The values in the table are important for financial calculations, particularly for determining how much a series of future payments is worth in today's dollars.### Table DescriptionThe table lists periods from 1 to 50 in rows, and interest rates ranging from 2% to 13% in columns. The intersection of each row and column gives the present value of an annuity of $1 for a particular period and interest rate. ### How to Use the Table- **Period:** Represents the duration (in years) for which the annuity is received.- **Interest Rate Columns:** Lists the interest rates from 2% to 13%.- **Present Value:** The numerical value at the intersection of the period row and interest rate column represents the present value of an annuity of $1 for that duration and interest rate.### Example- **Period:** 1 year- **Interest Rate:** 8%- **Present Value:** 0.9259This means that the present value of receiving $1 annually for 1 year at an 8% interest rate is $0.9259 today.### Detailed Example- **Period:** 3 years- **Interest Rate:** 6%- **Present Value:** 2.6730This indicates that the present value of receiving $1 annually for 3 years at a 6% interest rate is $2.6730 today.### Graphs and DiagramsThis table is purely numerical and does not contain any graphical representations. If one were to create a graph based on this data, it would typically display the relationship between the interest rates and the present values over different periods of time.Such a graph might show:- **X-axis:** Periods (1 to 50 years)- **Y-axis:** Present Value of an annuity of $1- **Lines or curves:** Representing different interest rates (2% to 13%)This table is a powerful tool for financial professionals and students alike, helping to simplify complex calculations involved in determining the present value of future cash flows. ### Land Sale Offers: Morton Company vs. Flynn Company**Scenario:**Mike Macaro is selling a piece of land. He has received two offers, each with different payment structures. Here's a detailed breakdown of the offers:**Offers:**1. **Morton Company** - Down payment: $48,000 - Annual payment: $35,800 for the next 4 years2. **Flynn Company** - Down payment: $29,000 - Annual payment: $38,800 for the next 4 years**Assumption:**- Money can be invested at 9% compounded annually.- Reference table: [Table 13.2]### Questions:**a. What is the value of these offers?** *(Do not round intermediate calculations. Round your answers to the nearest cent.)*Below is the table for recording the computed values:| Company | Value ||-------------------|--------------|| Morton Company | || Flynn Company | |**b. Which offer is better for Mike?**- Morton Company- Flynn Company**Graph/Diagram Explanation:**The diagram provides a comparative table and visual for transcribing the offers’ values. Additionally, it outlines the option selection for determining the better financial offer for Mike based on computed values from the given interest rate and payment structures.

The offer giving higher present value should be the offer to be chosen.

Mike Macaro is selling a piece of land. Two offers are on the table. Morton Company offered a $48,000 down payment and $35,800 a year for the next 4 years. Flynn Company offered $29,000 down and $38,800 a year for the next 4 years. Assume money can be invested at 9% compounded annually. (Use Table 13.2.) a. What is the value of the offers? (Do not round intermediate calculations. Round your answers to the nearest cent.) Value Morton Company Flynn Company b. Which offer is better for Mike? Morton Company O Flynn Company

Mike Macaro is selling a piece of land. Two offers are on the table. Morton Company offered a $48,000 down payment and $35,800 a year for the next 4 years. Flynn Company offered $29,000 down and $38,800 a year for the next 4 years. Assume money can be invested at 9% compounded annually. (Use Table 13.2.) a. What is the value of the offers? (Do not round intermediate calculations. Round your answers to the nearest cent.) Value Morton Company Flynn Company b. Which offer is better for Mike? Morton Company O Flynn Company

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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