This Website Has Been Moved to a New Link


Loading

E6-6 Ron Stein Company recently signed a

Price: $2.50


E6-6 (Future Value and Present Value Problems) Presented below are three unrelated situations.
(a) Ron Stein 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 10% per year. What amount will the company
receive at the time the lease expires?
(b) Kate Greenway Corporation, having recently issued a $20 million, 15-year bond issue, is committed
to make annual sinking fund deposits of $620,000. 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 Juan Rivera has an option of receiving either an
immediate bonus of $40,000, or a deferred bonus of $75,000 payable in 10 years. Ignoring tax considerations,
and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?

No comments:

Post a Comment