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The following are the time value of money formulas presented in the instructor notes. Use them as needed to answer the question below. You may also use the time value of money tables found on the last pages of your text. FV = PV * (FVIF, i, n ), FV = PV * (PVIF, i, n ) FVOA = PMT * (FVIFOA , i, n ), PVOA = PMT * (PVIFOA , i, n )

On January 1 Saturn Company purchases a piece of test equipment to be used in its engineering department. Terms of the purchase agreement call for an immediate $2,000 down payment, and subsequent payments of $5,000 each December 31 for the next 4 years. The interest rate stated in purchase agreement is 6%.

Determine the amount at which the equipment should be recorded in the books of Saturn Company at time of purchase (i.e. January 1, Year 1)

[answers may vary slightly due to rounding]

$22,000

$5,960

$22,325

$19,326

The following are the time value of money formulas presented in the instructor notes. Use them as needed to answer the question below. You may also use the time value of money tables found on the last few pages of your text. FV = PV * (FVIF, i, n ), FV = PV * (PVIF, i, n ) FVOA = PMT * (FVIFOA , i, n ), PVOA = PMT * (PVIFOA , i, n )

On January 1 a company determines it will need a new computer system costing $60,000 three years from now. It desires to make a single deposit into its bank today, January 1, that will grow to $60,000 three years from now.

If the bank is paying 5% interest compounded annually on such deposits calculate the amount of the deposit that needs to be made today.

[answers may vary slightly due to rounding]

$51,830

$49,566

$57,143

$54,422

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