An engineer is entitled to receive P25,000 at the beginning of each year for 18 years. If the rate ofinterest is 4% compounded annually.1. What is the present value of this annuity at the time he is supposed to receive the firstрayment?2. What is the sum of this annuity at the end of the 18th year?3. Find the difference between the sum of this annuity which is paid at the beginning ofeach year and an annuity paid at the end of each year.Ans.1. Р329,141.722. Р666,780.733. Р25,645.41

Solution 1: Present value of annuity = P25,000 * Cumulative PV factor at 4% for 18 periods of…

An engineer is entitled to receive P25,000 at the beginning of each year for 18 years. If the rate of interest is 4% compounded annually. 1. What is the present value of this annuity at the time he is supposed to receive the first раyment? 2. What is the sum of this annuity at the end of the 18th year? 3. Find the difference between the sum of this annuity which is paid at the beginning of each year and an annuity paid at the end of each year. Ans. 1. Р329,141.72 2. Р666,780.73 3. P25,645.41

An engineer is entitled to receive P25,000 at the beginning of each year for 18 years. If the rate of interest is 4% compounded annually. 1. What is the present value of this annuity at the time he is supposed to receive the first раyment? 2. What is the sum of this annuity at the end of the 18th year? 3. Find the difference between the sum of this annuity which is paid at the beginning of each year and an annuity paid at the end of each year. Ans. 1. Р329,141.72 2. Р666,780.73 3. P25,645.41

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

See similar textbooks

Similar questions

Using the information provided, what transaction represents the best application of the present value of an annuity due of $1? A. Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year. B. Compass, Inc., signs a note of $32,000, which requires the company to pay back the principal plus interest in four years. C. Bahwat Company plans to deposit a lump sum of $100.000 for the construction of a solar farm In 4 years. D. NYC Industries leases a car for 4 yearly annual lease payments of $12,000, where payments are made at the end of each year.
Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of 5,000 at the end of each of the next 5 years. Assume a prevailing interest rate of 15%. The present value of an ordinary annuity of 1 at 15% for 5 periods is 3.35. The future amount of an ordinary annuity of 1 at 15% for 5 periods is 6.74. The present value of 1 at 15% for 5 periods is 0.5. How much should Electro record as the cost of the machine? a. 12,500 b. 16,750 c. 25,000 d. 33,700
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
Amount of an Annuity John Goodheart wishes to provide for 6 annual withdrawals of 3,000 each beginning January 1, 2029. He wishes to make 10 annual deposits beginning January 1, 2019, with the last deposit to be made on January 1, 2028. Required: If the fund earns interest compounded annually at 10%, how much is each of the 10 deposits?
Value of an Annuity Using the appropriate tables, solve each of the following. Required: 1. Beginning December 31, 2020, 5 equal withdrawals are to be made. Determine the equal annual withdrawals if 30,000 is invested at 10% interest compounded annually on December 31, 2019. 2. Ten payments of 3,000 are due at annual intervals beginning June 30, 2020. What amount will be accepted in cancellation of this series of payments on June 30, 2019, assuming a discount rate of 14% compounded annually? 3. Ten payments of 2,000 are due at annual intervals beginning December 31, 2019. What amount will be accepted in cancellation of this series of payments on January 1, 2019, assuming a discount rate of 12% compounded annually?
Next Level Potter wishes to deposit a sum that at 12% interest, compounded semiannually, will permit 2 withdrawals: 40,000 at the end of 4 years and 50,000 at the end of 10 years. Analyze the problem to determine the required deposit, stating the procedure to follow and the tables to use in developing the solution.