E$9-13($Algo$)$ Computing Four Present Value Problems LO $9-7$

On January $1$ of this year, Skamania Company completed the following transactions $($assume a $10\%$ annual interest rate$)$: $($FV of $$1,$ PV

of $$1,$ FVA of $$1,$ and PVA of $$1)$

Note: Use the appropriate factor$($s$)$ from the tables provided.

a$.$ Bought a delivery truck and agreed to pay $$60,600$ at the end of three years.

b$.$ Rented an office building and was given the option of paying $$10,600$ at the end of each of the next three years or paying

$$28,600$ immediately.

c$.$ Established a savings account by depositing a single amount that will increase to $$91,200$ at the end of seven years.

d$.$ Decided to deposit a single sum in the bank that will provide $10$ equal annual year$-$end payments of $$40,600$ to a retired

employee $($payments starting December $31$ of this year$).$

Required:

a$.$ What is the cost of the truck that should be recorded at the time of purchase?

b$.$ Which option for the office building results in the lowest present value?

c$.$ What single amount must be deposited in this account on January $1$ of this year?

d$.$ What single sum must be deposited in the bank on January $1$ of this year?