Loading...

Messages

Proposals

Stuck in your homework and missing deadline? Get urgent help in $10/Page with 24 hours deadline

Get Urgent Writing Help In Your Essays, Assignments, Homeworks, Dissertation, Thesis Or Coursework & Achieve A+ Grades.

Privacy Guaranteed - 100% Plagiarism Free Writing - Free Turnitin Report - Professional And Experienced Writers - 24/7 Online Support

2 8 present value of investments answers

04/01/2021 Client: saad24vbs Deadline: 10 Days

Chapter 9


Time Value of Money


Problems


1. Future value (LO2) You invest $2,500 a year for three years at 8 percent.


a. What is the value of your investment after one year? Multiply $2,500 × 1.08.


b. What is the value of your investment after two years? Multiply your answer to part a by 1.08.


c. What is the value of your investment after three years? Multiply your answer to part b by 1.08. This gives your final answer.


d. Confirm that your final answer is correct by going to Appendix A (future value of $1), and looking up the future value for n = 3, and i = 8 percent. Multiply this tabular value by $2,500 and compare your answer to the answer in part c. There may be a slight difference due to rounding.


9-1. Solution:


a. $2,500 × 1.08 = $2,700


b. $2,700 × 1.08 = $2,916


c. $2,916 × 1.08 = $3,149.28


d. Appendix A (8%, 3 periods)


FV = PV × FVIF


$2,500 × 1.260 = $3,150


2. Present value (LO3) What is the present value of:


a. $8,000 in 10 years at 6 percent?


b. $16,000 in 5 years at 12 percent?


c. $25,000 in 15 years at 8 percent?


Solution:


3. Present Value (LO3)


a. What is the present value of $100,000 to be received after 40 years with an 18 percent discount rate?


b. Would the present value of the funds in part a be enough to buy a $125 concert ticket?


Solution:


Appendix B


PV = FV × PVIF (18%, 40 periods)


a. $100,000 × .001 = $100


b. NO. You only have $100 in present value.


4. Present Value (LO4) You will receive $4,000 three years from now. The discount rate is 10 percent.


a. What is the value of your investment two years from now? Multiply $4,000 × .909 (one year’s discount rate at 10 percent).


b. What is the value of your investment one year from now? Multiply your answer to part a by .909 (one year’s discount rate at 10 percent).


c. What is the value of your investment today? Multiply your answer to part b by .909 (one year’s discount rate at 10 percent).


d. Confirm that your answer to part c is correct by going to Appendix B (present value of $1) for n = 3 and i = 10%. Multiply this tabular value by $4,000 and compare your answer to part c. There may be a slight difference due to rounding.


9-4. Solution:


5. Future value (LO2) If you invest $12,000 today, how much will you have:


a. In 6 years at 7 percent?


b. In 15 years at 12 percent?


c. In 25 years at 10 percent?


d. In 25 years at 10 percent (compounded semiannually)?


9-5. Solution:


Appendix A


FV = PV × FVIF


a. $12,000 × 1.501 = $ 18,012


b. $12,000 × 5.474 = $ 65,688


c. $12,000 × 10.835 = $130,020


d. $12,000 × 11.467 = $137,604 (5%, 50 periods)


6. Present value (LO3) Your aunt offers you a choice of $20,000 in 50 years or $45 today. If money is discounted at 13 percent, which should you choose?


9-6. Solution:


7. Present Value (LO3) Your uncle offers you a choice of $100,000 in 10 years or $45,000 today. If money is discounted at 8 percent, which should you choose?


9-7. Solution:


Appendix B


PV = FV × PVIF (8%, 10 periods)


PV = $100,000 × .463 = $46,300


Choose $100,000 after 10 years.


8. Present Value (LO3) In Problem 7, if you had to wait until 12 years to get the $100,000, would your answer change? All other factors remain the same.


9-8. Solution:


9. Present Value (LO3) You are going to receive $200,000 in 50 years. What is the difference in present value between using a discount rate of 15 percent versus 5 percent?


9-9. Solution:


Appendix B


EMBED Equation.DSMT4


The difference is $17,200


EMBED Equation.DSMT4


10. Present Value (LO3) How much would you have to invest today to receive:


a. $12,000 in 6 years at 12 percent?


b. $15,000 in 15 years at 8 percent?


c. $5,000 each year for 10 years at 8 percent?


d. $40,000 each year for 40 years at 5 percent?


9-10. Solution:


11. Future value (LO2) If you invest $8,000 per period for the following number of periods, how much would you have?


a. 7 years at 9 percent.


b. 40 years at 11 percent.


9-11. Solution:


Appendix C


FVA = A × FV IFA


a. $8,000 × 9.20 = $ 73,600


b. $8,000 × 581.83 = $ 4,654,640


12. Future value (LO2) You invest a single amount of $12,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years?


9-12. Solution:


13. Present value (LO3) Mrs. Crawford will receive $6,500 a year for the next 14 years from her trust. If a 8 percent interest rate is applied, what is the current value of the future payments?


9-13. Solution:


Appendix D


PVA = A × PVIFA (8%, 14 periods)


= $6,500 × 8.244 = $53,586


14. Present value (LO3) John Longwaite will receive $100,000 in 50 years. His friends are very jealous of him. If the funds are discounted back at a rate of 14 percent, what is the present value of his future “pot of gold”?


9-14. Solution:


15. Present Value (LO3) Sherwin Williams will receive $18,000 a year for the next 25 years as a result of a picture he has painted. If a discount rate of 10 percent is applied, should he be willing to sell out his future rights now for $160,000?


9-15. Solution:


Appendix D


PVA = A × PVIFA (10%, 25 periods)


PVA = $18,000 × 9.077 = $163,386


No, the present value of the annuity is worth more than $160,000.


16. Present value (LO3) General Mills will receive $27,500 per year for the next 10 years as a payment for a weapon he invented. If a 12 percent rate is applied, should he be willing to sell out his future rights now for $160,000?


9-16. Solution:


17. Present value (LO3) The Western Sweepstakes has just informed you that you have won $1 million. The amount is to be paid out at the rate of $50,000 a year for the next 20 years. With a discount rate of 12 percent, what is the present value of your winnings?


9-17. Solution:


Appendix D


PVA = A × PVIFA (12%, 20 periods)


PVA = $50,000 × 7.469 = $373,450


18. Present value (LO3) Rita Gonzales won the $60 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10 percent. What is the current value of her winnings?


9-18. Solution:


19. Future value (LO2) Bruce Sutter invests $2,000 in a mint condition Nolan Ryan baseball card. He expects the card to increase in value 20 percent a year for the next five years. After that, he anticipates a 15 percent annual increase for the next three years. What is the projected value of the card after eight years?


9-19. Solution:


Appendix A


FV = PV × FVIF (20%, 5 periods)


= $2,000 × 2.488 = $4,976


FV = PV × FVIF (15%, 3 periods)


= $4,976 × 1.521 = $7,568.50


20. Future value (LO2) Christy Reed has been depositing $1,500 in her savings account every December since 2001. Her account earns 6 percent compounded annually. How much will she have in December 2010? (Assume that a deposit is made in December of 2010. Make sure to count the years carefully.)


9-20. Solution:


21. Future value (LO2) At a growth (interest) rate of 8 percent annually, how long will it take for a sum to double? To triple? Select the year that is closest to the correct answer.


9-21. Solution:


Appendix A


If the sum is doubling, then the tabular value must equal 2.


In Appendix A, looking down the 8% column, we find the factor closest to 2 (1.999) on the 9-year row. The factor closest to 3 (2.937) is on the 14-year row.


22. Present value (LO3) If you owe $30,000 payable at the end of five years, what amount should your creditor accept in payment immediately if she could earn 11 percent on her money?


9-22. Solution:


23. Present value (LO3) Barney Smith invests in a stock that will pay dividends of $3.00 at the end of the first year; $3.30 at the end of the second year; and $3.60 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $50. What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.)


9-23. Solution:


Appendix B


PV = FV × PVIF


Discount rate = 11%


$ 3.00 × .901 = $ 2.70


3.30 × .812 = 2.68


3.60 × .731 = 2.63


50.00 × .731 = 36.55


$44.56


24. Present value (LO3) Mr. Flint retired as president of Color Title Company but is currently on a consulting contract for $45,000 per year for the next 10 years.


a. If Mr. Flint’s opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract?


b. Assuming that Mr. Flint will not retire for two more years and will not start to receive his 10 payments until the end of the third year, what would be the value of his deferred annuity?


Solution:


Using a Two Step Procedure


a.


Alternative Solution


b.


Chapter 09: Time Value of Money


PAGE


9-PAGE 11

Homework is Completed By:

Writer Writer Name Amount Client Comments & Rating
Instant Homework Helper

ONLINE

Instant Homework Helper

$36

She helped me in last minute in a very reasonable price. She is a lifesaver, I got A+ grade in my homework, I will surely hire her again for my next assignments, Thumbs Up!

Order & Get This Solution Within 3 Hours in $25/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 3 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 6 Hours in $20/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 6 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

Order & Get This Solution Within 12 Hours in $15/Page

Custom Original Solution And Get A+ Grades

  • 100% Plagiarism Free
  • Proper APA/MLA/Harvard Referencing
  • Delivery in 12 Hours After Placing Order
  • Free Turnitin Report
  • Unlimited Revisions
  • Privacy Guaranteed

6 writers have sent their proposals to do this homework:

University Coursework Help
Top Essay Tutor
Helping Hand
Writer Writer Name Offer Chat
University Coursework Help

ONLINE

University Coursework Help

Hi dear, I am ready to do your homework in a reasonable price.

$37 Chat With Writer
Top Essay Tutor

ONLINE

Top Essay Tutor

I have more than 12 years of experience in managing online classes, exams, and quizzes on different websites like; Connect, McGraw-Hill, and Blackboard. I always provide a guarantee to my clients for their grades.

$40 Chat With Writer
Helping Hand

ONLINE

Helping Hand

I am an Academic writer with 10 years of experience. As an Academic writer, my aim is to generate unique content without Plagiarism as per the client’s requirements.

$35 Chat With Writer

Let our expert academic writers to help you in achieving a+ grades in your homework, assignment, quiz or exam.

Similar Homework Questions

Which answer best describes the topics covered in sprint planning - A hollow conducting sphere with an outer radius of - Ieee 9 bus system matlab model - Uq matlab activation key - Hard capital rationing and soft capital rationing - Vocabulary workshop level orange - D7 Diabetes in school - Naplan bands year 9 - Discussion study questions for john updike's a&p - Tweetdeck comn - Example of depression in math - Panera bread supply chain analysis - Don funk scene 1 production tasks - Kmc property tax calculation - Pegged mortise and tenon - Vertically opposite angles ppt - NEED 3+ PAGES WITH 4 PEER REVIEWED REFERENCES CITED IN APA FORMAT - Everyman's way of the cross - Fill in the blanks with the correct forms of the indicated adjectives. - Floating egg experiment hypothesis - National Healthcare Issue/Stressor in the US - Ifsm 201 excel project 2 rental cars - Schott duran glass bottles - How to reference aasw practice standards - International truck restoration parts - Finding your worldview thinking christianly about the world - Hound of the baskervilles discussion questions - Case study on COPD exacerbation - Fuel tank vents da40 - Graphic organizer for homework - To spread his evangelical message billy graham quizlet - Case Study - Sonnets from the portuguese context - Case study 6.3 johnson & rogers software engineering inc - Executive Practical Connection Activity - Should Nursing be considered a global profession - Insecure direct object references tutorial - Wisconsin snowmobile corp is considering - Me talk pretty one day summary sparknotes - 187 lbs in stone - Firms that do the product leadership strategy well include which of the following factors: - Why change programs don t produce change pdf - MED SURGE - What does wiesel say about memory in his speech - Does hair revital x work - Composition and rhetoric - Cube root of zero - Columbus custom carpentry a compensation case study solution - Select characteristics exhibited by exotoxins but not exhibited by endotoxins - Http www nrtw org rtws htm - Initiating the Project-Problem set 4 - Fusion io iodrive2 365gb - Gilgamesh map - Fish tank finding nemo characters - Probablities questions (MATH) - Tafe nsw enterprise agreement 2021 - West norwood better gym opening times - 110 plantain road shailer park - Martingale asset management case study solution - Verizon Communications - R pod 176t floor plan - I would like to volunteer letter - De longhi magnifica warning lights - Cultural diversity - Effective networking strategies and skills - Unsw negligible risk ethics - Nursing - Meeting effectiveness survey questions - Annotated Biblography - Century battery catalogue pdf - Convert 1m to km - Enterprise Risk Management - Human resources for nike shoes - How to do hess's law calculations - Internation 5 ok - Assignment 1 (Evidence-Based Practice Paper Reflection) - Oliver twist chapter 14 summary - Consumer Behaviour - Final Paper - End of act 5 - A localization strategy focuses on increasing profitability by - Matlab easy question - 4 elements of malpractice claim nursing - Bbc skimming and scanning - English Composition I - 2 nuns in a bathtub joke - Astro unl edu naap hr animations hr html - Swatch annual report 2015 - Cpu time formula example - Business research management - SWOT Analysis - Specification for highway works series 600 - New Testament, Crucifixion of Christ - Telegrams tremble like leaves from a wintering tree - What are the causes and consequences of congressional gridlock - Ff k 24s twsh - Nike corporate governance issues - Nursing Power point - Assignment - How to describe a statue - High sierra sidekick screwdriver antenna