Find the present value of the cash flows shown using a discount rate of 8 percent....

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Find the present value of the cash flows shown using a discount rate of 8 percent. Assume that each payment occurs at the end of the year. YEAR 1-4 5 6 7-15 16 CASHFLOW $100/yr. 200 300 100/yr. 400 21. According to a local department store, the store charges its customers 1% per month on the outstanding balances of their charge accounts. What is the effective annual rate on such customer credit? Assume the store recalculates your account balance at the end of each month. 22. Your bank has offered you a $15,000 loan. The terms of the loan require you to pay back the loan in five equal annual installments of $4,161.00. The first payment will be made a year from today. What is the effective rate of interest on this loan? 23. You have agreed to pay a creditor $5,000 one year hence, $4,000 two years hence, $3,000 three years hence, $2,000 four years hence, and a final payment of $1,000 five years from now. Due to budget considerations, you would like to make five equal annual payments to satisfy your contract. If the agreed upon interest is 5% effective per year, what should the equal annual payments be? 24. You have purchased a new sailboat and have the option of paying the entire $8,000 now or making equal, annual payments for the next 4 years, the first payment due one year from now. If your time value of money is 7 percent, what would be the largest amount for the equal, annual payments that you would be willing to undertake? Find the present value of the cash flows shown using a discount rate of 8 percent. Assume that each payment occurs at the end of the year. YEAR 1-4 5 6 7-15 16 CASHFLOW $100/yr. 200 300 100/yr. 400 21. According to a local department store, the store charges its customers 1% per month on the outstanding balances of their charge accounts. What is the effective annual rate on such customer credit? Assume the store recalculates your account balance at the end of each month. 22. Your bank has offered you a $15,000 loan. The terms of the loan require you to pay back the loan in five equal annual installments of $4,161.00. The first payment will be made a year from today. What is the effective rate of interest on this loan? 23. You have agreed to pay a creditor $5,000 one year hence, $4,000 two years hence, $3,000 three years hence, $2,000 four years hence, and a final payment of $1,000 five years from now. Due to budget considerations, you would like to make five equal annual payments to satisfy your contract. If the agreed upon interest is 5% effective per year, what should the equal annual payments be? 24. You have purchased a new sailboat and have the option of paying the entire $8,000 now or making equal, annual payments for the next 4 years, the first payment due one year from now. If your time value of money is 7 percent, what would be the largest amount for the equal, annual payments that you would be willing to undertake?

Answer rating: 100% (QA)

To find the present value of the cash flows we need to discount each cash flow back to the present using the given discount rate of 8 percent Heres ho... View the full answer