The graph below shows present values and future values of single payments for various interest rates...
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The graph below shows present values and future values of single payments for various interest rates over six periods. Answer the following questions. Future Value and Present Value $3,500 $3,000 $2,500 of a Single Payment Future Values $2,986 $2,000 $1,772 Present $1,500 $1,340 Values $1,000 $1,000 $500 $1,126 $0 n = 0 1 2 3 4 5 6 -2% ⚫5% 10% -20% Click here to open the graph(s) in a new tab. Required: 1. Today (n = 0), a company invests $1,000 and expects that investment to grow 10% each period for the next six periods (n = 6). What is the investment's expected future value? 2. A company expects to receive $1,772 in six periods. What is that amount's present value, assuming the company's other current investment opportunities are expected to earn 10% per period? 3. The difference between the present value and future value for a given rate represents: 4. The difference between present value and future value: 5. The difference between present value and future value: 6. A company has the choice of receiving $1,000 today from a customer or receiving $1,340 in six periods. Which option does the company prefer, assuming the company's other current investment opportunities are expected to earn 5% per period? 7. A company has the choice of receiving $1,000 today from a customer or receiving $1,200 in six periods. Which option does the company prefer, assuming the company's other current investment opportunities are expected to earn 2% per period? The graph below shows present values and future values of single payments for various interest rates over six periods. Answer the following questions. Future Value and Present Value $3,500 $3,000 $2,500 of a Single Payment Future Values $2,986 $2,000 $1,772 Present $1,500 $1,340 Values $1,000 $1,000 $500 $1,126 $0 n = 0 1 2 3 4 5 6 -2% ⚫5% 10% -20% Click here to open the graph(s) in a new tab. Required: 1. Today (n = 0), a company invests $1,000 and expects that investment to grow 10% each period for the next six periods (n = 6). What is the investment's expected future value? 2. A company expects to receive $1,772 in six periods. What is that amount's present value, assuming the company's other current investment opportunities are expected to earn 10% per period? 3. The difference between the present value and future value for a given rate represents: 4. The difference between present value and future value: 5. The difference between present value and future value: 6. A company has the choice of receiving $1,000 today from a customer or receiving $1,340 in six periods. Which option does the company prefer, assuming the company's other current investment opportunities are expected to earn 5% per period? 7. A company has the choice of receiving $1,000 today from a customer or receiving $1,200 in six periods. Which option does the company prefer, assuming the company's other current investment opportunities are expected to earn 2% per period?
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Related Book For
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
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