You have an opportunity to make an investment that will pay $500 at the end of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You have an opportunity to make an investment that will pay $500 at the end of the first year, $500 at the end of the second year, $200 at the end of the third year, $400 at the end of the fourth year, and $400 at the end of the fifth year. a. Find the present value if the interest rate is 12 percent. (Hint: You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the NPV function in Excel or to use your CF key on a financial calculator-but you'll want to check your calculator's manual before you use this key. Keep in mind that with the NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present. With a financial calculator, you should keep in mind that CF is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF = 0.) b. What would happen to the present value of this stream of cash flows if the interest rate were zero percent? a. What is the present value of the investment if the interest rate is 12 percent? b. What is the present value of the investment if the interest rate is zero percent? You have an opportunity to make an investment that will pay $500 at the end of the first year, $500 at the end of the second year, $200 at the end of the third year, $400 at the end of the fourth year, and $400 at the end of the fifth year. a. Find the present value if the interest rate is 12 percent. (Hint: You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the NPV function in Excel or to use your CF key on a financial calculator-but you'll want to check your calculator's manual before you use this key. Keep in mind that with the NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present. With a financial calculator, you should keep in mind that CF is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF = 0.) b. What would happen to the present value of this stream of cash flows if the interest rate were zero percent? a. What is the present value of the investment if the interest rate is 12 percent? b. What is the present value of the investment if the interest rate is zero percent?
Expert Answer:
Answer rating: 100% (QA)
Answer a To find the present value of the investment we need to discount each cash flow back to th... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Subj: accounting The Jimz Company estimates its factory overhead fro the next period at Php 500,000. It is estimated that 10,000 units will be produced at amaterials cost of Php 400,000 and will...
-
GMG Studios plans to invest $55,000 at the end of each year for the next five years. There are three investment options available. Option 1 Option 2 Option 3 Required: Annual Ratel Period Invested...
-
PROGRAM IN JAVA, USING NETBEANS Programming Most of the credit for the programming part of this final will be given for making good use of the programming ideas weve covered. A program that runs with...
-
. 4. Bank overdrafts repayable on * 1 point demand may be included in the cash and cash equivalent balance. True O False
-
Assume you are the grocery buyer for canned fruits and vegetables at a five-store grocery chain. Del Monte has told you and your boss that it would be responsible for making inventory decisions for...
-
Subtract. Borrow when necessary. Reduce the difference to lowest terms (simplify). 12 - 4 1/8
-
Why must a company hold liquid assets?
-
You are assessing internal control in the audit of the payroll and personnel cycle for Rogers Products Company, a manufacturing company specializing in assembling computer parts. Rogers employs...
-
9 B points Seved ellook Print Required: Determine the missing amounts in each of the following four independent scenarios: a. X Company had a $4,500 beginning balance in accounts receivable on...
-
Account form presentation for the balance sheet is demonstrated by what? Question options: a) Assets=liabilities and equity in horizontal format b) The liabilities are deducted from assets and then...
-
The following activities which is not likely to be an interaction between a financial manager in the marketing manager.
-
Consider the following function and then answer the question 29 and 30. ALGORITHM q29p (A[1...r]) BEGIN p=A[1]; i=1;j=r+1 repeat repeat i=i+1 until A[i] >=p repeat j=j-1 until A[j] =j swap (A[i],...
-
The average recommended calorie intake for men is 2550 Cal. If an average of 6 kcal is obtained per gram of food, and meals are had three times a day, how many grams must each meal be? 283 142 213...
-
Verify z = 2 is a solution of the equation z3+2z23z 10 = 0. Hence, find the other two solutions.
-
The Market Approach is a Third Wave idea and quite different from the Second Wave approach of relying on regulation we have used for decades in the US. In 1 - 2 pages (~3 - 5 paragraphs) tell me; a)...
-
11 7.69 points eBook H Use the following information to prepare the July cash budget for Acco Company. Ignore the "Loan activity" section of the budget a. Beginning cash balance on July 1: $70,000....
-
Design an experiment to demonstrate that RNA transcripts are synthesized in the nucleus of eukaryotes and are subsequently transported to the cytoplasm.
-
How does activity-based management (ABB) build on ABC?
-
Explain the difference between a traditional hotel accounting approach and that used in CPA.
-
How can CPA aid management decision making?
Study smarter with the SolutionInn App