Paul Parent Investment Evaluation
Not what you're looking for?
1) Paul Parent is evaluating investment alternatives for saving for his infant daughters college education. He has estimated that he will need $225,000 upon her graduation from high school in 18 years. Paul has the following options:
1. Locking in an 8 percent investment with a lump sum payment today
2. Earning a 9 percent return based on annual even contributions over the next 18 years, or
3. Locking in a 7 percent investment for $5,000 and earning a 10% return on even annual contributions.
Paul has the relevant present value tables that show the following factors:
7% 8% 9% 10%
Future value of $1 for 18 years 3.379 3.996 4.717 5.559
Future value of an annuity for 18 years 33.999 37.45 41.301 45.599
Present value of $1 for 18 years 0.285 0.250 0.215 0.180
Present value of an annuity for 18 years 9.958 9.372 8.787 8.201
Assuming Paul can afford any of these options, which alternative results in the lowest investment?
2) Lisa's Boutique is renting prime store space at the Regional mall and just signed a five-year lease effective January 1, 20X4 with the following terms:
Refundable security deposit $1,500
Monthly lease payments $3,000
Lease bonus due at signing $18,000
Lisa has had to make significant renovations to the store prior to moving in. The renovations cost $50,000 and have a useful life of 8 years. What will Lisa's Boutique record occupancy expense for the year ended on December 31, 20X4?
Purchase this Solution
Solution Summary
Two accounting problems are solved.
Solution Preview
Note: The present value in the table for 7% are not correct.
Question 1
7% 8% 9% 10%
Future value of $1 for 18 years 3.3799 3.9960 4.7171 5.5599
Future value of an annuity for 18 years 33.9990 37.4502 41.3013 45.5992
Present value of $1 for 18 years 0.2959 0.2502 0.2120 0.1799
Present value an annuity for 18 years 10.0591 9.3719 8.7556 8.2014
OPTIONS ...
Purchase this Solution
Free BrainMass Quizzes
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Introduction to Finance
This quiz test introductory finance topics.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.