Question: Determining the present value of a lump-sum future cash receipt Stan Sweeney turned 20 years old today. His grandfather had established a trust fund that

Determining the present value of a lump-sum future cash receipt Stan Sweeney turned 20 years old today. His grandfather had established a trust fund that will pay him $80,000 on his next birthday. However, Stan needs money today to start his college education, and his father is willing to help. Mr. Sweeney has agreed to give Stan the present value of the $80,000 future cash inflow, assuming a 10 percent rate of return.

Required

a. Use a present value table to determine the amount of cash that Stan Sweeney’s father should give him.

b. Use an algebraic formula to prove that the present value of the trust fund (the amount of cash computed in Requirement a) is equal to its $80,000 future value.

Step by Step Solution

★★★★★

3.50 Rating (160 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Present value Present value Future valu... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

67-B-A-I (381).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

How are the present value of a lump sum and the periodic payment of a sinking fund similar? How are they different?

Determining the present value of a lump-sum future cash receipt Cornelius Toran has a terminal illness. His doctors have estimated his remaining life expectancy as three years. Cornelius has a...

How is the present value of a lump sum determined?

Solve for table below please & sankiu :) that was all the information provided 470 Chapter 10 LO 10-1 Exercise 10-2A Determining the present value of a lump-sum future cash receipt Larry Mattingly...

Please solve for the following: this is all the information A c E F G H 1 Name: Managerial Accounting Chapter 10 2 3 4 5 Exercise 10-2A Part A Only Future Value Part a Present Value Factor (Table 1)...

Please solve for the following excel sheet porfavor. this is all the information provided. A c E F G H 1 Name: Managerial Accounting Chapter 10 2 3 4 5 Exercise 10-2A Part A Only Future Value Part a...

10-2A Required Indicate which of the following items will result in cash inflows and which will result in cash out- flows. The first one is shown as an example. Item a. Initial investment b. Salvage...

Determining the present value of a lump-sum future cash receipt Nolan Heth turned 20 years old today. His grandfather established a trust fund that will pay Mr. Heth $50,000 on his next birthday....

Determining the present value of a lump-sum future cash receipt Larry Mattingly turned 20 years old today. His grandfather had established a trust fund that will pay him $120,000 on his next...

1: Identifying cash inflows and outflows Indicate which of the following items will result in cash inflows and which will result in cash outflows: a. Initial investment b. Salvage values c. Recovery...

The manager of Salem News, Inc., prepared the companys balance sheet as of April 30, 2012, while the accountant was ill. The balance sheet contains numerous errors. In particular, the manager knew...

A thin strip of steel of length L = 20in. and thickness t = 0.2 in. is bent by couples M0 (see figure). The deflection at the midpoint of the strip (measured from a line joining its end points) is...

How many prescriptions refill are allowed for scheduled 3 control substances? When must this prescription be filled before expiring

The debits and credits from two transactions are presented in the following creditor's (supplier's) account: Describe each transaction and the source of each posting. NAME ADDRESS Migrant Technology...

Fixed manufacturing costs are $ 44 per unit, and variable manufacturing costs are $ 100 per unit. Production was 67,200 units, while sales were 50,400 units. Determine (a) Whether variable costing...

The beginning inventory is 52,800 units. All of the units that were manufactured during the period and 52,800 units of the beginning inventory were sold. The beginning inventory fixed manufacturing...

You are the mechanical engineer in charge of maintaining the machines in a factory. The plant manager has asked you to evaluate a proposal to replace the current machines with new ones. The old and...

Variable manufacturing costs are $ 126 per unit, and fixed manufacturing costs are $ 157,500. Sales are estimated to be 10,000 units. a. How much would absorption costing income from operations...

Remittances from developed countries amount to over $500 billion each year. Most of these funds are sent by foreign workers and migrants to their home countries. Is this similar to the gains from...

Classifying Costs: Product or GS&A/Asset or Expense Required Use the following format to classify each cost as a product cost or a general, selling, and administrative (GS&A) cost. Also indicate...

Identifying effect of product versus general, selling, and administrative costs on financial statements Required Highfield Corporation recognized accrued compensation cost. Use the following model to...

Identify effect of product versus general, selling, and administrative costs on financial statements Required Lowder Industries recognized the annual cost of depreciation on December 31, 2008. Using...

Assume Evco, Inc. has a current stock price of $45.37 and will pay a $1.95 dividend in one year; its equity cost of capital is 15%. What price must you expect Evco stock to sell for immediately after...

On July 10, 2012, you purchase a $10,000 par T-note that matures in five years. The settlement occurs on July 11, 2019. The coupon sate is 7 percent and the current price quote is 95 1564 percend The...

Holding company Scully Corporation bolds enough stock in company A and company B to give it voting control of both firms. Consider the accompanying simplified balance shears for these companies. What...