Solution Manual for Fundamentals of Financial Accounting 6th Edition by Phillips
Appendix C
Present and Future Value Concepts
ANSWERS TO QUESTIONS
 The time value of money is the idea that a dollar received today is worth more than a dollar to be received at any later date because it can be invested today to earn interest over time.
 Future valueâ€”The future value of a number of dollars is the amount that it will increase to in the future at i interest rate for n periods. The future value is the principal plus accumulated interest compounded each period.
Present valueâ€”The present value of a number of dollars, to be received at some specified date in the future, is that amount discounted to the present at i interest rate forÂ n periods. It is the inverse of future value. In compound discounting, the interest is subtracted rather than added as in compounding.
 $10,000 x 2.59374 = $25,937 (rounded to the nearest dollar).
 $8,000 x .38554 = $3,084 (rounded to the nearest dollar).
 An annuity is a term that refers to equal periodic cash payments or receipts of an equal amount each period for two or more periods. In contrast to a future value of $1, or a present value of $1 (which involves a single contribution or amount), an annuity involves a series of equal contributions for a series of equal periods. An annuity may refer to a future value or a present value.
6. 
Table Values 

Concept  i = 5% n =4  i = 10%; n =7  i = 14%; n = 10  
FV of $1  1.21551  1.94872  Â 3.70722  
PV of $1  0.82270  0.51316  Â 0.26974  
FV of annuity of $1  4.31013  9.48717  19.33730  
PV of annuity of $1  3.54595  4.86842  Â 5.21612  
 $1,000 x 14.48656 = $14,487. (rounded to the nearest dollar)
Authors’ Recommended Solution Time
(Time in minutes)
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Miniexercises 
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Exercises 
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Problems 

No.  Time  No.  Time  No.  Time 
1  2  1  10  CP1  20 
2  2  2  15  CP2  20 
3  6  3  15  CP3  20 
4  6  4  15  CP4  15 
5
6 7 8 9 10 11 12

3
3 3 3 3 3 3 3 
5
6 7

5
10 8 
PA1
PA2 PA3 PA4 PB1 PB2 PB3 PB4

20
20 20 15 20 20 20 15 
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Â
Â
Â
ANSWERS TO MINIEXERCISES
MCâ€“1Â Â Â Â Â Â Â Â Â Â Â Â
$500,000 Â´ 0.46319 (Table C.2, n=10, i=8%)  =  $231,595 
MCâ€“2Â Â Â Â Â Â Â Â Â Â Â Â
Â $15,000 Â´Â Â 6.14457 (Table C.4, n=10, i=10%)  =  $92,169 
MCâ€“3
Â Â Â Â $100,000 (no PV)  =  $100,000 
+Â Â $100,000 Â´ 0.92593 (Table C.2, n=1, i=8%)  =  92,593 
+Â Â $ 30,000 Â´ 9.81815 (Table C.4, n=20, i=8%)  =  Â Â 294,545 
Total  =  $487,138 
MCâ€“4
$25,000 Â´ 15.93742 (Table C.3, n=10, i=10%)  =  $398,436  
$15,000 Â´ 57.27500 (Table C.3, n=20, i=10%)  =  $859,125  
It is much better to save $15,000 for 20 years.