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Future and Present Value: Dwayne Wade, Serena Williams and Rex Walters

A) Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

b) Serena Williams Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $600,000. The deposits are made on the last day of each year and yield a return of 10%. Will the fund at the end of 15 years be sufficient to retire the bonds? If not, what will the deficiency be?

c) Under the terms of his salary agreement, president Rex Walters has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $70,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Walters accept?

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a) Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of $12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year. What amount will the company receive at the time the lease expires?

You need to use the following future value formula to solve this problem.

FV = PV (1+i)n where PV is the present value or the security deposit
i is the interest rate
n is the period

Then, we can replace the information given into the ...

Solution Summary

This solution is comprised of a detailed explanation and calculation to find the present value and future value for each problem formatted in the attached Word document.

$2.19