Exam 23: Time Value of Money Module

At the beginning of 2015, Laura Company issued 10-year bonds with a face value of $4,000,000 due on December 31, 2020. The company will accumulate a fund to retire these bonds at maturity. It will make ten annual deposits to the fund beginning on December 31, 2015. How much must the company deposit each year, assuming that it will earn 12% interest compounded annually?

The formula to calculate the present value of an ordinary annuity is: $p V o = C \times \left[ \frac { 1 - \frac { 1 } { ( 1 + i ) ^ { n } } } { i } \right]$

Present value measurements involve estimation of future cash flows, the timing, amount, and the risk of those cash flows which create a relevant accounting measurement.

The FASB Statement of Financial Accounting Concepts No. 7 describes five elements that together may be used to determine the value of various assets and liabilities, what are these five elements?

Samos Excavating is considering purchasing some new equipment for the company. Due to the expense involved, the equipment company is giving Samos the option of choosing between four different payments plans.

Match the diagrams with the concepts by writing the identifying letter of the diagram on the blank line to the left of the concept. "VAL" represents the value to be calculated.

The future amount of an annuity due is determined one period

Georgia deposits $4,000 every three months for five years. The first deposit is made on March 31, 2014, and the last deposit is made on December 31, 2018. The fund earns 16% and interest is compounded quarterly. How much money will Georgia have on December 31, 2018, immediately after her last deposit? Factors for future value of an annuity of $1 are For Values of n and i =20;I=4\% n=5;i=16\% 7978079 6.87135

What are the five steps that can be applied to all of the time value of money techniques to assist in calculations?

When the present value of an annuity is calculated as of two or more periods before the payment of the first cash flow, the annuity is

Jessie's Dry Cleaner began making $2,000 equal, annual deposits in a fund starting on January 2, 2014. The fund earns 10% compounded annually, and the last deposit is made on January 2, 2018. How much will be in the fund on January 2, 2019, one year after the final deposit?

Using the compound interest tables, answer the following questions Required: -a. What amount of interest will be earned on an investment of $\$ 10,500$ left on deposit by Marcy for three years at $9 \%$ interest compounded annually? b. Travis deposited $\$ 10,000$ in a fund that earns $8 \%$ interest compounded annually. How many years will it take for the fund to grow to $\$ 21,589.25 ?$

FASB financial accounting concepts on using estimated future cash flow information in accounting measurements to value various assets and liabilities identified each of the following elements except

Maxine has $1,000 to invest today. How much will her money be worth in 15 years if she earns 9% compounded semiannually on her money?

Mathias Company estimated that it has a 20% probability of receiving $240,000 one year from now, a 30% probability of receiving $240,000 two years from now, and a 50% probability of receiving $240,000 three years from now. Required: Using the FASB's concept of "expected cash flows," calculate the present value of the expected cash flows assuming a 10% interest rate compounded annually.

Match the appropriate equation with the correct terminology.

To compare the value of amounts received at different times in the future, dollar amounts

The future value of an annuity due is determined one period after the first cash flow in the series.

Joshua desires to purchase an annuity on January 1, 2014, that yields him five annual cash flows of $10,000 each, with the first cash flow to be received on January 1, 2017. The interest rate is 10% compounded annually. The cost (present value) of the annuity on January 1, 2014, is

The formula to compute the future value of a single sum is: FV = PV x (1 - i)ⁿ.