##### Question 1 Find the present value of an investment in plant and-(Answered)

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__Question 1__

Find the present value of an investment in plant and equipment if it is expected to provide annual earnings of $26,000 for 15 years and to have a resale value of $50,000 at the end of that period.

Assume a 10% rate and earnings at year end, and the the following factors:

The present value of 1 at 10% for 15 periods is .23939.

The present value of an ordinary annuity at 10% for 15 periods is 7.60608.

The future value of 1 at 10% for 15 periods is 4.17725.

__Question 2__

On January 15, 2012, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2016, at an estimated cost of $5,000,000. Dolan plans to make four equal annual deposits in

a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2012. Future value factors are as follows:

Future value of 1 at 10% for 5 periods 1.61

Future value of ordinary annuity of 1 at 10% for 4 periods 4.64

Future value of annuity due of 1 at 10% for 4 periods 5.11

Dolan should make four annual deposits of?

__Question 3__

During the past year, Stacy McGill planted a new vineyard on 150 acres of land that she leases for $31,060 a year. She has asked you, as her accountant, to assist her in determining the value of her vineyard operation.

The vineyard will bear no grapes for the first 5 years (1?5). In the next 5 years (6?10), Stacy estimates that the vines will bear grapes that can be sold for $61,290 each year. For the next 20 years (11?30), she expects the harvest will provide annual revenues of $111,160. But during the last 10 years (31?40) of the vineyard?s life, she estimates that revenues will decline to $83,280 per year.

During the first 5 years, the annual cost of pruning, fertilizing, and caring for the vineyard is estimated at $9,410; during the years of production, 6?40, these costs will rise to $12,780 per year. The relevant market rate of interest for the entire period is 11%. Assume that all receipts and payments are made at the end of each year.

Required:?Dick Button has offered to buy Stacy?s vineyard business by assuming the 40-year lease. On the basis of the current value of the business, what is the minimum price Stacy should accept?

$31060+9410=$40470X5=(202,350)

$31060+(219200)

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Question 1

Find the present value of an investment in plant and equipment if

it is expected to provide annual earnings of $26,000 for 15 years

and to have a resale value of $50,000 at the end of that period.

Assume a 10% rate and earnings at year end, and the the

following factors:

The present value of 1 at 10% for 15 periods is .23939.

The present value of an ordinary annuity at 10% for 15 periods is

7.60608.

The future value of 1 at 10% for 15 periods is 4.17725.

Question 2

On January 15, 2012, Dolan Corp. adopted a plan to accumulate

funds for environmental improvements beginning July 1, 2016, at

an estimated cost of $5,000,000. Dolan plans to make four equal

annual deposits in

a fund that will earn interest at 10% compounded annually. The

first deposit was made on July 1, 2012. Future value factors are as

follows:

Future value of 1 at 10% for 5 periods

1.61

Future value of ordinary annuity of 1 at 10% for 4

periods

4.64

Future value of annuity due of 1 at 10% for 4

periods

5.11

Dolan should make four annual deposits of?

Question 3

During the past year, Stacy McGill planted a new vineyard on 150

acres of land that she leases for $31,060 a year. She has asked

you, as her accountant, to assist her in determining the value of

her vineyard operation.

The vineyard will bear no grapes for the first 5 years (1?5). In the

next 5 years (6?10), Stacy estimates that the vines will bear

grapes that can be sold for $61,290 each year. For the next 20

years (11?30), she expects the harvest will provide annual

revenues of $111,160. But during the last 10 years (31?40) of the

vineyard?s life, she estimates that revenues will decline to

$83,280 per year.

During the first 5 years, the annual cost of pruning, fertilizing,

and caring for the vineyard is estimated at $9,410; during the

years of production, 6?40, these costs will rise to $12,780 per

year. The relevant market rate of interest for the entire period is

11%. Assume that all receipts and payments are made at the end

of each year.

Required:Dick Button has offered to buy Stacy?s vineyard

business by assuming the 40-year lease. On the basis of the

current value of the business, what is the minimum price Stacy

should accept?

$31060+9410=$40470X5=(202,350)

$31060+12780=43840X5(219200)

Paper#9209871 | Written in 27-Jul-2016

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