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# Values and statement of cash flows

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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
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