Required: 1. In transaction (a), determine the present value of the debt. Note: Round your intermediate calculations and final answer to nearest whole dollar. Present value

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Required information
[The following information applies to the questions displayed below.]
On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): (
FV of $1, PV of $1, FVA of $1, and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
a. Promised to pay a fixed amount of $7,500 at the end of each year for nine years and a one-time payment of
$118,000 at the end of the 9th year.
b. Established a plant remodeling fund of $492,250 to be available at the end of Year 10. A single sum that will grow to
$492,250 will be deposited on January 1 of this year.
c. Agreed to pay a severance package to a discharged employee. The company will pay $76,500 at the end of the first
year, $114,000 at the end of the second year, and $151,500 at the end of the third year.
d. Purchased a $177,500 machine on January 1 of this year for $35,500 cash. A five-year note is signed for the balance.
The note will be paid in five equal year-end payments starting on December 31 of this year.
Required:
1. In transaction (a), determine the present value of the debt.
Note: Round your intermediate calculations and final answer to nearest whole dollar.
Present value
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] On January 1, Boston Company completed the following transactions (use a 7% annual interest rate for all transactions): ( FV of $1, PV of $1, FVA of $1, and PVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Promised to pay a fixed amount of $7,500 at the end of each year for nine years and a one-time payment of $118,000 at the end of the 9th year. b. Established a plant remodeling fund of $492,250 to be available at the end of Year 10. A single sum that will grow to $492,250 will be deposited on January 1 of this year. c. Agreed to pay a severance package to a discharged employee. The company will pay $76,500 at the end of the first year, $114,000 at the end of the second year, and $151,500 at the end of the third year. d. Purchased a $177,500 machine on January 1 of this year for $35,500 cash. A five-year note is signed for the balance. The note will be paid in five equal year-end payments starting on December 31 of this year. Required: 1. In transaction (a), determine the present value of the debt. Note: Round your intermediate calculations and final answer to nearest whole dollar. Present value
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