Solution Manual for Taxation of Individuals 10th Edition by Spilker

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 value—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 value—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 for 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	3.70722
	PV of $1	0.82270	0.51316	0.26974
	FV of annuity of $1	4.31013	9.48717	19.33730
	PV of annuity of $1	3.54595	4.86842	5.21612

$1,000 x 14.48656 = $14,487. (rounded to the nearest dollar)

Authors’ Recommended Solution Time

(Time in minutes)

Mini-exercises		Exercises		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

ANSWERS TO MINI-EXERCISES

MC–1

$500,000 ´ 0.46319 (Table C.2, n=10, i=8%)

$231,595

MC–2

$15,000 ´ 6.14457 (Table C.4, n=10, i=10%)

$92,169

MC–3

$100,000 (no PV)	=	$100,000
$100,000 ´ 0.92593 (Table C.2, n=1, i=8%)	=	92,593
$ 30,000 ´ 9.81815 (Table C.4, n=20, i=8%)	=	294,545
Total	=	$487,138

MC–4

$25,000 ´ 15.93742 (Table C.3, n=10, i=10%)	=		$398,436
$15,000 ´ 57.27500 (Table C.3, n=20, i=10%)	=	$859,125

It is much better to save $15,000 for 20 years.

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Solution Manual for Taxation of Individuals 10th Edition by Spilker

Solution Manual for Taxation of Individuals 10th Edition by Spilker