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Values and statement of cash flows

8. Present value of an investment in equipment. (Tables needed.)
Find the present value of an investment in equipment if it is expected to provide annual savings of $10,000 for 10 years and to have a resale value of $25,000 at the end of that period. Assume an interest rate of 9% and that savings are realized at year end.

9. Future value of an annuity due. (Tables needed.)
If $4,000 is deposited annually starting on January 1, 2007 and it earns 9%, how much will accumulate by December 31, 2016?

10. Calculations for statement of cash flows.
Vinson Co. sold a machine that cost $74,000 and had a book value of $44,000 for $50,000. Data from Vinson's comparative balance sheets are:
12/31/08 12/31/07
Machinery $800,000 $690,000
Accumulated depreciation 190,000 136,000

Instructions
What four items should be shown on a statement of cash flows (indirect method) from this information? Show your calculations.

Solution Preview

8. Present value of an investment in equipment. (Tables needed.)
Find the present value of an investment in equipment if it is expected to provide annual savings of $10,000 for 10 years and to have a resale value of $25,000 at the end of that period. Assume an interest rate of 9% and that savings are realized at year end.

You need to find the present value annuity of annual savings of $10,000 and the present value of the resale value of $25,000 at the end of 10 years.

PVA = W x 1 - 1 where PVA is the present value
(1 + R)N W is the amount received each quarter
...

Solution Summary

This solution is comprised of a detailed explanation to find the present value of an investment in equipment if it is expected to provide annual savings of $10,000 for 10 years and to have a resale value of $25,000 at the end of that period. Assume an interest rate of 9% and that savings are realized at year end.

$2.19