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Problems 307 (c) Diane Ross has $20,000 to invest tod ay at 9% to pay a debt of $47,347. How many years will it take her to accumulate enough to liquidate the debt? (d) Cindy Houston has a $27,600 debt that she wishes to repay 4 years from today; she has $19,553 that she intends to invest for the 4 years. Wha t rate of interest will she need to earn annually in order to accumulate enough to pay the debt? P6-3 (Lo2,4) (Analysis of Alternatives) Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involv- ing two different qualities of surfacing for a parking area of 12,000 square yards. Bid A: A surface that costs $5.75 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface. Bid B: require annual maintenance in each year except the last year, at an estimated cost of 9 cents per square yard. A surface that costs $10.50 per square yard to install. This surface has a probable useful life of 10 years and will Instructions Prepare computations showing which bid should be accepted by Wal-Mart. You may assume that the cost of capital is 9% that the annual maintenance expenditures are incurred at the end of each year, and that prices are not expected to change during the next 10 vears. P6-4(L04) EXCEL (Evaluating tery. The federal government wil deductta satar te o 46% immediately. (2) Alternatively, the lottery offers H equal payments of 536,000 with the first payment occurring when Howie turns in the winning ticket. Howi each of these payments at a rate of 25%. Payment Alternatives) Howie Long has just learned he has won a $500,000 prize in the lot- all the money today, the state and owie a payout of 20 e will be taxed on e lottery has given him two options for receiving the payments. (1)

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