Calculate Present Value [LO 2] Jua

Chapter 9: Exercises 9-4, 9-7, 9-8, 9-9, 9-11, 9-12, 9-14, 9-16 (pages 347-348) • Problems 9-7, 9-12, 9-17 (pages 351-355)

EXERCISE 9-4. Using Present Value Tables [LO 1] What is the present value of $600 per year for five years if the required return is 10 percent (answer using Table 2 in Appendix B).

Cash Present Value                

                          Flow                    Factor                              Total

                           $600                     3.7908                         $2,274.48

EXERCISE 9-7. Calculate Present Value [LO 2] Juanita Martinez is ready to retire and has a choice of three pension plans. Plan A provides for an immediate cash payment of $200,000. Plan B provides for the payment of $20,000 per year for 10 years and the payment of $200,000 at the end of year 10. Plan C will pay $35,000 per year for 10 years. Juanita Martinez desires a return of 8 percent.Determine the present value of each plan and select the best one.