140% Zoom Class Activity 01/1) - Edited .. -T Chart Text Shape Media Insert Table Comment View Add Category Section 2 Problems + Section 1 Review Examples c D 33 G Ex. 3 You expect 10 years of payments that increase at 5% annually. The first payment (P1) is worth $1,000, at an annually compounded interest rate of 8%, what is the PV of the series? 35 36 37 NPV Excel Function: Answer: 39 40 41 42 First pmt 43 n $1,000.00 10 8% 5% 1 45 B (growth rate) V10 = ? 40 47 Period 49 50 52 53 Cash flows grow at 5% each period 0 1 $1,000.00 2 $1,050.00 3 $1,102.50 4 $1,157.63 5 $1,215.51 6 $1,276.28 7 $1,340.10 8 $1.407.10 9 $1,477.46 10 $1,551.33 55 56 57 50 63 tv L MacBook Air Q 51 SO 3 888 58 esc @ ! 1 2 # 3 $ 4 & 7 % 5 6 2 U W Y E c T R 119% Zoom Insert Table Chart Text Shape M View Add Category Section 2 Problems + Section 1 Review Examples C B D G E H 02 63 Ex4 a-You are scheduled to receive $1,000 next year (n=1) and $10,000 in 5 years (n=5). At 5% interest compounded annually, what is the PV of the series? 04 65 66 67 NPV Excel Function: Answer: 88 $8,787.64 69 5% interest rate 70 71 72 73 74 75 Cash flows: Period 75 77 78 29 Cash flow 0 1 2 3 4 5 $1,000.00 $0.00 $0.00 $0.00 $10,000.00 80 VO? $8,787.64 82 83 b-Suppose you renegotiate the series so that you receive the same PV but via three equal payments at years 1. 2. and 3. How large must the payments be? Interest rate remains at 5% 84 85 85 87 Excel Function: Answer: Use prmt 88 89 90 91 5% 3 32 PV pmt 95 3 ty MacBook Air esc 30 F 38 F1 F2 A # ! 1 @ 2 $ 4 % 5 3 6 7