A Donor Agrees to Contribute $5,000 Per Year at the End

question 74

Multiple Choice

A donor agrees to contribute $5,000 per year at the end of each of the next five years to a voluntary health and welfare organization.The donor did not place any use restrictions on the amount pledged.The stream of the payments is discounted at 6 percent.The first payment of $5,000 is received at the end of the first year.The present value factor for a five-payment annuity due on June 30,20X9,at 6 percent is 4.2124.The present value factor for a four-payment annuity due on June 30,20X9,at 6 percent is 3.4651.
-Based on the preceding information,at the end of the first year,the pledge increased net assets without donor restrictions by:

• A)$25,000.
• B)$21,062.
• C)$4,212.
• D)$5,000.

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Definitions:

Rights Offering

A form of raising capital where a company offers existing shareholders the right to purchase additional shares at a discounted price before offering them to the public.

Price-earnings Ratio

The price-earnings ratio (P/E ratio) is a valuation metric comparing a company's current share price to its per-share earnings, helping investors assess the value of a stock.

Value Of A Right

The theoretical financial value of a right given to existing shareholders to purchase additional shares at a discount before a new issuance.

Rights Offering

A method by which a company offers new shares to its existing shareholders in proportion to their current shareholding, typically at a discount to the current market price.