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    Present Value and Bond Liability

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    Computation of present value and bond liability. See attached file for full problem description.

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    Solution Preview

    a. This is an ordinary annuity and the present value can be found using the table 6-4. The formula to use is
    PV = Annuity Amount X PVIFA (period, interest rate)
    Given the periods and the interest rates, we look up the factor in the table. Multiply the annuity amount by the factor to get the present value.
    PV = 30,000 X PVIFA (8,12%).
    From table 6-4 the factor for 8 periods and 12% is 4.96764
    PV = 30,000 X 4.96764 = 149,029.20

    b. We do the same way here, the time period is 16 and the interest rate ...

    Solution Summary

    The solution has two problems - E6-5 relating to computation of present value and E6-13 relating to computation of bond liability for Lance Armstrong Inc