Find the future value of $10 received today and deposited for 2 years at 5%. (b)Find the
Question:
Find the future value of $10 received today and deposited for 2 years at 5%.
(b)Find the present value of $10 to be received 2 years from now, assuming an opportunity cost of 5%.
(c)Find the future value of an ordinary annuity of $10 each year for 2 years, deposited at 5%.
(d)Find the present value of an ordinary annuity of $10 each year for 2 years, deposited at 5%.
Exercise 4.2. Present and Future Values—Mixed Stream
(a)Find the present value of $500 received at the end of year 1, $400 received at the end of year 2, and $300 received at the end of year 3, assuming an opportunity cost of 7%.
(b)Find the future value of $500 received at the end of year 1, $400 received at the end of year 2, and $300 received at the end of year 3, assuming an opportunity cost of 7%.
Exercise 4.3. Loan Payment
Find the actual end-of-period loan payment in each of the following situations.
(a)Jennifer borrows $15,000 for a new car. The terms of the loan are 12% interest with monthly payments for 2 years.
(b)Anderson Equipment purchases a new lathe for $35,000. The lathe is financed with a bank loan with an interest rate of 7%, to be repaid in 5 equal annual installments.
Exercise 4.4. Amortization Schedule
Prepare an amortization schedule for a $100,000 loan with an interest rate of 8%, to be repaid in four equal annual installments.
Exercise 4.5. Present Value—Mixed Stream
Find the present value of the following stream of cash flows, assuming the firm's opportunity cost is 20%.
Years Amount
1-6 $2300
7-10 $58,000
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham