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    PV FV: Kate Greenway Corporation Ron Stein Company J. Rivera

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    (Future Value and Present Value Problems)

    Presented below are three unrelated situations. (Hint: Use tables in text.)

    (a) Ron Stein 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? (Round answer to 2 decimal places, e.g. 10,250.20.)

    $

    (b) Kate Greenway Corporation, having recently issued a $20 million, 15-year bond issue, is committed to make annual sinking fund deposits of $620,000. 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? (Round answer to 2 decimal places, e.g. 100,250.20.)

    $

    (c) Under the terms of his salary agreement, president Juan Rivera has an option of receiving either an immediate bonus of $40,000, or a deferred bonus of $75,000 payable in 10 years. Ignoring tax considerations, and assuming a relevant interest rate of 8%, which form of settlement should Rivera accept?

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    Solution Preview

    Your tutorial is in Excel, attached. I used the tables in the ...

    Solution Summary

    Your tutorial is in Excel, attached. I used the tables in the book I had. Some books use four decimal places and some use five. You can check your tables and see if it matches. If you change the table factors, the computations will automatically update.

    $2.19