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Determine the amount that must be deposited

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Reference no: EM13496947

On January 1, a company completed the following transactions.

  1. Borrowed $100,000 for six years. Interest payments of $6,200 will be due at the end of each year and the $100,000 will be repaid at the end of the sixth year.
  2. Established a plant fund of $390,000 to be available at the end of year seven. A single amount will be deposited today to grow to $390,000.
  3. Agreed to a buyout package for a former executive. The company will pay $80,000 at the end of the first year; $120,000 at the end of the second year; and $165,000 at the end of the third year.

 

Required (assume a 6% annual rate for all transactions and round to the nearest dollar):

  1. For transaction a, determine the present value of the debt.
  2. For transaction b, determine the amount that must be deposited on January 1. How much interest revenue will be earned over the six years?
  3. For transaction c, determine the present value of the obligation.

 

Reference no: EM13496947

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