EBK FINANCIAL & MANAGERIAL ACCOUNTING
13th Edition
ISBN: 9780100545052
Author: WARREN
Publisher: YUZU
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Chapter 12, Problem 12.20EX
To determine
Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.
To Determine: The increase or decrease in present value of winnings using an interest rate of 10% and 6%.
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Calculate the future value of an annuity, with case A being an ordinary annuity and case B being an annuity due.
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Future Value of an Annuity
Refer to each case in the table below to answer what is required in this problem.
Required:
Find the future value of the annuity, assuming that it is
(1) An ordinary annuity.
(2) An annuity due.
Compare your findings in parts a(1) and a(2). All else being identical, which type of
annuity—ordinary or annuity due—is preferable? Explain why.
Using an annuity, you may calculate the present value of a single payment or a series of payments you will receive. Is this statement correct or incorrect?
Chapter 12 Solutions
EBK FINANCIAL & MANAGERIAL ACCOUNTING
Ch. 12 - Describe the two distinct obligations incurred by...Ch. 12 - Explain the meaning of each of the following terms...Ch. 12 - Prob. 3DQCh. 12 - A corporation issues 26,000,000 of 9% bonds to...Ch. 12 - Prob. 5DQCh. 12 - The following data relate to a 2,000,000, 8% bond...Ch. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Fleeson Company needs additional funds to purchase...Ch. 12 - Prob. 10DQ
Ch. 12 - Prob. 12.1APECh. 12 - Prob. 12.1BPECh. 12 - Issuing bonds at face amount On January 1, the...Ch. 12 - Prob. 12.2BPECh. 12 - Issuing bonds at a discount On the first day of...Ch. 12 - Prob. 12.3BPECh. 12 - Prob. 12.4APECh. 12 - Prob. 12.4BPECh. 12 - Prob. 12.5APECh. 12 - Prob. 12.5BPECh. 12 - Prob. 12.6APECh. 12 - Prob. 12.6BPECh. 12 - Redemption of bonds payable A 1,500,000 bond Issue...Ch. 12 - Prob. 12.7BPECh. 12 - Prob. 12.8APECh. 12 - Prob. 12.8BPECh. 12 - Prob. 12.9APECh. 12 - Prob. 12.9BPECh. 12 - Prob. 12.1EXCh. 12 - Prob. 12.2EXCh. 12 - Prob. 12.3EXCh. 12 - Prob. 12.4EXCh. 12 - Prob. 12.5EXCh. 12 - Prob. 12.6EXCh. 12 - Prob. 12.7EXCh. 12 - Entries for issuing and calling bonds; loss Adele...Ch. 12 - Entries for issuing and calling bonds; gain Emil...Ch. 12 - Entries for installment note transactions On the...Ch. 12 - Prob. 12.11EXCh. 12 - Entries for installment note transactions On...Ch. 12 - Prob. 12.13EXCh. 12 - Prob. 12.14EXCh. 12 - Prob. 12.15EXCh. 12 - Prob. 12.16EXCh. 12 - Present value of amounts due Tommy John is going...Ch. 12 - Present value of an annuity Determine the present...Ch. 12 - Prob. 12.19EXCh. 12 - Prob. 12.20EXCh. 12 - Prob. 12.21EXCh. 12 - Prob. 12.22EXCh. 12 - Amortize discount by interest method On the first...Ch. 12 - Prob. 12.24EXCh. 12 - Prob. 12.25EXCh. 12 - Prob. 12.26EXCh. 12 - Prob. 12.1APRCh. 12 - Prob. 12.2APRCh. 12 - Bond premium, entries for bonds payable...Ch. 12 - Prob. 12.4APRCh. 12 - Prob. 12.5APRCh. 12 - Prob. 12.6APRCh. 12 - Prob. 12.1BPRCh. 12 - Prob. 12.2BPRCh. 12 - Prob. 12.3BPRCh. 12 - Prob. 12.4BPRCh. 12 - Prob. 12.5BPRCh. 12 - Prob. 12.6BPRCh. 12 - Prob. 12.1CPCh. 12 - Prob. 12.2CPCh. 12 - Prob. 12.3CPCh. 12 - Preferred stock vs. bonds Xentec Inc. has decided...Ch. 12 - Prob. 12.5CPCh. 12 - Prob. 12.6CP
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- Complete the following for the present value of an ordinary annuity. (Use Table 13.2.) (Do not round intermediate calculations. Round your answer to the nearest cent.) Present value (amount needed now to invest to receive annuity) Amount of Payment Time Interest rate annuity expected %24 860 Annually 5 years 7 % acerarrow_forwardvalue of a future payment change as the un to recelpt is lengthened? As the interest rate increases? What's the difference between an ordinary annuity and an annuity due? Why would you prefer to receive an annuity due for $10,000 per year for 10 years than an otherwise similar ordinary annuity? iii.arrow_forwardUse a calculator to evaluate the present value of an annuity formula P = m 1 − 1 + r n −nt r n for the values of the variables m, r, and t (respectively). Assume n = 12. (Round your answer to the nearest cent.) $50; 3%; 6 yr $arrow_forward
- 5. Future Value of an Annuity The table below contains information on four different annuities. a) Calculate the future value of each annuity if it is i) An ordinary annuity ii) An annuity due b) Compare your findings. All else being identical, which type of annuity-ordinary annuity or annuity due—is preferable? Why? Part Annual CF Interest Rate Deposit Period (Years) A $1,000 B $1,200 C $6,000 D $20,000 3% 6% 8% 12% 5825 12 15arrow_forward6. Present Value of an Annuity The table below contains information on four different annuities. a) Calculate the present value of each annuity if it is i) An ordinary annuity ii) An annuity due b) Compare your findings. All else being identical, which type of annuity-ordinary annuity or annuity due-is preferable? Why? Part Annual CF Interest Rate Deposit Period A $12,000 B $52,000 C $20,000 D $24,000 8% 10% 6% 12% (Years) 8 15 20 8arrow_forwardIn the present value of an annuity due table, the factors ________. Group of answer choices decrease as the interest rates increase, given a set number of periods decrease as the periods increase, given a set interest rate increase as the periods decrease, given a set interest rate increase as the interest rates increase, given a set number of periodsarrow_forward
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