Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of
Question:
Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
1. | On June 30, 2016, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $10,000 on the purchase date and the balance in five annual installments of $8,000 on each June 30 beginning June 30, 2017. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? Table values are based on: n= i=
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2. | Johnstone needs to accumulate sufficient funds to pay a $400,000 debt that comes due on December 31, 2021. The company will accumulate the funds by making five equal annual deposits to an account paying 6% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2016
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