1.Investment X offers to pay you $5,700 per year for seven years, whereas Invest
ID: 2648224 • Letter: 1
Question
1.Investment X offers to pay you $5,700 per year for seven years, whereas Investment Y offers to pay you $7,800 per year for four years.
Calculate the present value for Investment X and Y if the discount rate is 6 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Present value
Investment X
$
Investment Y
$
Calculate the present value for Investment X and Y if the discount rate is 16 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
Present value
Investment X
$
Investment Y
$
2.
value:
1.00 points
Toadies, Inc., has identified an investment project with the following cash flows.
Year
Cash Flow
1
$
1,425
2
1,545
3
1,630
4
1,680
If the discount rate is 7 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Future value
$
If the discount rate is 12 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Future value
$
If the discount rate is 23 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
3.
value:
1.00 points
If you put up $40,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Annual cash flow
$
4.
value:
1.00 points
Your company will generate $59,000 in annual revenue each year for the next eight years from a new information database. If the appropriate interest rate is 8.25 percent, what is the present value of the savings? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Present value
$
5.
value:
1.00 points
If you deposit $4,700 at the end of each of the next 20 years into an account paying 10.80 percent interest, how much money will you have in the account in 20 years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Future value
$
How much will you have if you make deposits for 40 years? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Future value
$
6.
value:
1.00 points
You want to have $79,000 in your savings account 13 years from now, and you
1.Investment X offers to pay you $5,700 per year for seven years, whereas Investment Y offers to pay you $7,800 per year for four years.
Explanation / Answer
Solution:
1. Present Value (PV) of annuity = Annuity * {[1- (1+i)-n/ i}
where,
i = interest rate (discount rate),
n = number of periods.
At 6% discount rate-
Present Value (PV) of Investment X = 5,700 * { [1-(1+6%)-7]/ 6%}
= 5,700 * 5.5824
= 31,819.57
Present Value (PV) of Investment X = 7,800 * { [1-(1+6%)-4]/ 6%}
= 7,800 * 3.4651
= 27,027.82
Present Value (PV) of Investment X = $31,819.57
Present Value (PV) of Investment Y = $27,027.82.
At 16% discount rate-
Present Value (PV) of Investment X = 5,700 * { [1-(1+16%)-7]/ 16%}
= 5,700 * 4.0386
= 23,019.82
Present Value (PV) of Investment X = 7,800 * { [1-(1+16%)-4]/ 16%}
= 7,800 * 2.7982
= 21,825.81
Present Value (PV) of Investment X = $23,019.82
Present Value (PV) of Investment Y = $21,825.81.
2. Future Value = PV of year1 * (1+r)1 + PV of year2 * (1+r)2 + .. _+ PV of year n * (1+r)n.
Future Value at 7% = [1,425*(1+7%)^1] + [1,545*(1+7%)^2] + [1,630*(1+7%)^3] + 1,680 = $6,970.44
Future Value at 12% = [1,425*(1+12%)^1] + [1,545*(1+12%)^2] + [1,630*(1+12%)^3] + 1,680 = $7,504.08
Future Value at 23% = [1,425*(1+23%)^1] + [1,545*(1+23%)^2] + [1,630*(1+23%)^3] + 1,680= $8,803.39
Future Value at 7% = $6,970.44
Future Value at12% = $7,504.08
Future Value at 23% = $8,803.39.
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