Assume Boeing sold a 767 aircraft to American Airlines on January 1, 2016. The sales agreement required
Question:
Assume Boeing sold a 767 aircraft to American Airlines on January 1, 2016. The sales agreement required American Airlines to pay $10 million immediately and $10 million on December 31 of each year for 20 years, beginning on December 31, 2016. Boeing and American Airlines judge that 8% is an appropriate interest rate for this arrangement.
a. Compute the present value of the receivable on Boeing’s books on January 1, 2016, immediately after receiving the $10 million down payment.
b. Compute the present value of the receivable on Boeing’s books on December 31, 2016.
c. Compute the present value of the receivable on Boeing’s books on December 31, 2017.
Step by Step Answer:
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw