Question : 100. Incognito Company contemplating the purchase of a machine that provides : 1412665

100.

Incognito Company is contemplating the purchase of a machine that provides it with net after-tax cash savings of $80,000 per year for five years. Interest is 8%. Assume the cash savings occur at the end of each year.

Required: 

Calculate the present value of the cash savings.

101.

Samson Inc. is contemplating the purchase of a machine that will provide it with net after-tax cash savings of $100,000 per year for eight years. Interest is 10%. Assume the cash savings occur at the end of each year.

Required: 

Calculate the present value of the cash savings.

102.

Under the MLB deferred compensation plan, payments made at the end of each year accumulate up to retirement and then retirees are given two options. Option 1 allows the retiree to select the amount of the annual payment to be received, and option 2 allows the retiree to specify over how many years payments are to be received. Assume Sosa has had $5,000 deposited at the end of each year for 40 years, and that the long-term interest rate has been 7%.

Required:

a. How much has accumulated in Sosa's deferred compensation account?
b. How much will Sosa be able to withdraw at the beginning of each year if he elects to receive payments for 20 years?
c. For how many years will Sosa be able to receive payments if he chooses to receive $115,000 per year at the beginning of each year? 
 
 

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