Question 1 What amount of cash would result at the end of one year, if $25,000 i

Question

Question 1

What amount of cash would result at the end of one year, if $25,000 is invested today and the rate of return is 9%? (Do not round your PV factors.)

A. $25,000

B. $27,000

C. $27,250

D. $22,750

Question 2

Lane Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $11,900 per year for 3 years. Assuming that the required rate of return is 6%, what is the present value of these cash inflows? (Do not round your PV factors and intermediate calculations. Round your final answer to the nearest dollar.)

A. $31,809

B. $29,974

C. $31,773

D. $33,679

Explanation / Answer

Q1.

Amount of Cash that would result after one Year= 25,000 x 1.09 = $27,250

So, the correct option is C. 27,250

Q2.

Formula to calculate PV of annuity = Payment/ interest [1 - 1 / (1 + interest)^n]

Present Value = 11,900 / 0.06 [1 - 1 / (1 + 0.06)^3]

Present Value = 11,900 / 0.06 [1 - 1 / 1.191016]

Present Value = $31,809

So, the correct option is A $31,809

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