Piandre Angelo A.

Fernando
11932716

Cash Price or Cash Value - Exercise 2

1. Mr. Coronacion acquired a resort by making a P5M down payment and a sequence of P600,000
payments made at the end of each year for 5 years. If money is worth 18% effective rate
computed annually, how much is the cash price of the resort?

Given: DP = P5,000,000; R = P600,000; t = 5; m = 1; j = 0.18

Solution:

Solve for j:
1

𝑗 = 𝑚[(1 + 𝑤) 𝑚 − 1]
1

𝑗 = 1[(1 + 0. 18) 1 − 1]
𝑗 = 0.18

n = tm = (5)(1) = 5
i = j/m = 0.18/1 = 0.18

−𝑛
1−(1+𝑖)
𝐴 = 𝑅[ 𝑖
]
−5
1−(1+0.18)
𝐴 = 600000[ 0.18
]
𝐴 = $1,876,302.61

Cash Price = DP + A
Cash Price = $5,000,000 + $1,876,302.61
Cash Price = $6,876,302.61

Answer:
The cash price of the resort is $6,876,302.61.

2. Mrs. Enciso paid P500,000 as down payment for a piece of property in Tagaytay. The remaining
liability is to be settled by paying P50,000 at the end of each month for 3 years. If money is worth
15% compounded monthly, how much is the cash price of the property?

Given: DP = P500,000; R = P50,000; j = 0.15; t = 3; m = 12

Solution:
n = tm = (3)(12) = 36
i = j/m = 0.15/12 = 0.0125
 −𝑛
1−(1+𝑖)
𝐴 = 𝑅[ 𝑖
]
−36
1−(1+0.0125)
𝐴 = 50000[ 0.0125
]
𝐴 = $1,442,363.37

Cash Price = DP + A
Cash Price = $500,000 + $1,442,363.37
Cash Price = $1,942,363.37

Answer:
The cash price of the property is $1,942,363.37.