General price inflation is estimated to be 3% for the next 5 years, 5 % the 5 years after that, and 8% the following 5 years. If you invest $10,000 at 10% for those 15 years, what is the future worth of your investment in Year-0-dollars at that time?

General price inflation is estimated to be 3% for the next 5 years, 5 % the 5 years after that, and 8% the following 5 years. If you invest $10,000 at 10% for those 15 years, what is the future worth of your investment in Year-0-dollars at that time?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

See similar textbooks

Related questions

Q: The stock market has an average annual return of 10% per year. We will consider the annual return to…

A: Present Value(PV) is current value of amount to be received or paid at future date; PV is computed…

Q: 2. ABC Corporation plans to set aside $50,000 per year beginning 1 year from now for replacing…

A: Annual amount (P) = $50,000 Interest rate (r) = 10% Inflation rate (i) = 4% Period (t) = 6 Years

Q: How much is the sum of the present value of the expected return over those periods

A: Cash Flows (Year 1-10) (CF) = $15,000 per year Annual interest rate (r) = 5% Time Period (t) = 10…

Q: Starting in year 3 you will receive 5 yearly payments on January 1 for P50,000. You want to know the…

A: Net Present Value (NPV) is a capital budgeting technique which uses a discount rate to bring all the…

Q: What single investment made today, earning 10 % annual interest, will be worth 10,000 TL at the end…

A: Note: Since you have asked multiple questions, we will solve the first question for you. If you want…

Q: Econo-Cool air conditioners cost $400 to purchase, result in electricity bills of $169 per year, and…

A: PV is the present worth of cash flows that are expected to occur in the future.

Q: (Present Value of an Income Stream)Suppose the market interest rate is 10 percent. Would you be…

A: The present value of future income should be higher than the lending amount at present The formula…

Q: A certain amount of money after a decade is said to b worth Php 12,000.00. If the interest rate…

A: first calculate the amount after first half present value = FV/(1+rate)n = 12,000/(1 + 1.1%/6)5*6 =…

Q: If we were to invest $10,000 in an S&P 500 index fund, pay 0.2% annual fees,and add $100 a month…

A: Computation:

Q: Calculate the purchasing power of $80,000 in 15 years using an annual inflation rate of 6%. Round to…

Q: n annuity pays $1000 per year for 10 years. Inflation is 6 percent per year. ) If the real MARR is 8…

A: Real interest rate is reduced due to inflation but the actual rate is much larger.

Q: You just signed a business consulting contract with one of your clients. The client will pay you…

Q: What single investment made today, earning 10 % annual interest, will be worth $10,000 at the end of…

A: A) The present value of a future value can be calculated using the formula below: Given; FV = 10000…

Q: Consider a firm that expects to generate the following earnings stream over the next five years. The…

A: The question is based on the concept of Financial Management.

Q: Your client currently has $7,600 in a 401K investment account. They contribute $200 a month into…

A: Current Value in Account = 7600 Monthly Contribution = 200 Monthly Compounding, Annual Return = 5.3%…

Q: You are evaluating a growing perpetuity product from a large financial services firm. The product…

A: here is the formula for calculating the present value of growing perpetuity PV = A/(r-g) where…

Q: a. What do you get at the end, if you save $100 for 8 years with 15% interest rate?

A: a) Annual saving (A) = $100 r = 15% n = 8 years

Q: An investment pays $1,950 per year for the first 3 years, $3,900 per year for the next 8 years, and…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: Answer the following questions: TIME VALUE OF MONEY years. What is the investment's FV at rates of…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Acquirer Company’s management believes that there is a 60% chance that Target Company’s FCFF will…

A: Calculation of expected value of Target Company: Answer: Expected value is $94,909,218.48

Q: An investment of $8,000 is made at time 0 with returns of $3,500 at the end of each of years 1–4,…

A: present worth formula: pw=-initial investment+present value of future cashflow

Q: An investment of $1,000 was made 35 years ago. What is the amount now at the market interest rate of…

A: FV = PV (1 + r)n where, FV = Future ValuePV = Present Valuer = Interest Raten = No.…

Q: You are evaluating a growing perpetuity product from a large financial services firm. The product…

A: The cash flows that are started immediately after the investment and go on for an infinite time…

Q: You deposited $10,000 today into a saving account for 5 years with a market rate of 8% per year. The…

A: Deposit amount = $ 10000 Period = 5 Years Interest rate = 8% Inflation rate = 2%

Q: The market for widgets is increasing by 15% per year from current profits of $2,000,000. Investing…

A: Given information : Incremental rate = 15% Current profits = $2,000,000 Expected decline in price =…

Q: An investment promises to pay $5,000 at the end of each year for the next four years and $3,000 at…

A: Annuity payment is the series payment of a certain amount for a particular period of time. Under…

Q: You found an investment opportunity to deposit $15,000 every year for 10 years into an account…

A: The future value of an annuity is the recurring amount, which is being submitted at a particular…

Q: A certain amount of money after a decade is said to be worth Php 10,000.00. IF the interest rate…

A: Present Value = Future Value/(1+EAR)n EAR = (1+nominal rate/m)m -1 m is number of times interest…

Q: The average cost of a certain model car was $22,000 ten years ago. This year the average cost is…

A: Expected Return: The expected return is the minimum required rate of return which an investor…

Q: An investment pays 3000 in one year, 2000 at the end of the second year and 1000 at the end of the…

A: Hi, thanks for posting the question. But as per our Q&A guidelines, the first three subparts…

Q: Assume that you are going to receive $350,000 in 10 years. The current market rate of interest is…

A: Present value of amount to be received in 10 years = Amount to be received x Present value factor…

Q: An investment pays $1000 in two years and $3000 at the end of the fifth year. It is priced to yield…

A: Given: The investment gives 1000 in two years means 1000 in year1, 1000 in year2 and 3000 at the…

Q: What is the present value of the expected cash flows for the next 10 years if the interest rate is…

A: Present value of growing annuity refers to the value of series of periodic payments in today's terms…

Q: In one year’s time, you plan to invest a certain sum of money that will grow to R100 000 ten years…

A: Future value = R 100,000 Period = 10 Years Annual interest rate = 11% As per formula…

Q: Acquirer Company's management believes that there is a 60% chance that Target Company's FCFF will…

A: Value at 60% probability: Formulas:

Q: At EOY zero (now), a geometric gradient has a positive cash flow of $1,000 and for the following 5…

A: Present Value (PV) is current value of amount to be transacted in future. It is computed by…

Q: A small company plans to spend $10,000 in year 2 and $10,000 in year 5. At an interest rate of…

A: Equivalent annual worth analysis is done to determine the net worth after subtracting equivalent…

Q: Suppose you have $1,000,000 today and starting a year from now you intend to spend this money over…

A: Solution:- When an equal amount is spent each period at end of the period, it is called ordinary…

Q: Acquirer Company's management believes that there is a 60% chance that Target Company's FCFF will…

A: Horizon value of a company is the present value of all the future cash flows. Horizon value is…

Q: How much will $10,000 grow to in 3 years, assuming an interest rate of 9% compounded quarterly? What…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Consider the following alternatives: i. $100 received in one year ii. $230 received in 5 years iii.…

A: Present Value = Future Value(1+i)n where, i= Interest rate n= period

Q: Consider an EOY geometric gradient, which lasts for eight years, whose initial value at EOY one is…

A: Calculation of p0 The value of P0 can be calculated by using the following formula P0=…

Q: percent coming year. Jahice CO ellen thinks the total real return on this investment will be only 9…

A: Given, Total return = 14% Real return on investment = 9% Inflation rate = (1+NR) / (1+RR) - 1…

Question

No excel Please and thank you

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

If you invest $15,000 today, how much will you have in (for further instructions on future value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%
How much would you invest today in order to receive $30,000 in each of the following (for further instructions on present value in Excel, see Appendix C): A. 20 years at 22% B. 12 years at 10% C. 5 years at 14% D. 2 years at 7%
How much must be invested now to receive $30,000 for 10 years if the first $30.000 is received one year from now and the rate is 8%?
Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
If you invest $12,000 today, how much will you have in (for further Instructions on future value in Excel, see Appendix C): A. 10 years at 9% B. 8 years at 12% C. 14 years at l5% D. 19 years at 18%
Jullo Company is considering the purchase of a new bubble packaging machine. If the machine will provide $20,000 annual savings for 10 years and can be sold for $50,000 at the end of the period, what is the present value of the machine investment at a 9% interest rate with savings realized at year end?
You are interested in an investment project that costs $40,000 initially. The investment has a 5-year horizon and promises future end-of-year cash inflows of $12,000, $12,500, $11,500, $9,000, and $8,500, Your current opportunity cost is 6.50% per year. However, the Fed has stated that inflation may rise by 1.5% or may fall by the same amount over the next 5 years. Assume a direct positive impact of inflation on the prevailing rates (Fisher effect) and answer the following questions: (Assume that inflation has an impact on the opportunity cost, but that cash flows are contractually fixed and are not affected by inflation.) a. What is the net present value (NPV) of the investment under the current required rate of return? b. What is the net present value (NPV) of the investment under a period of rising inflation? c. What is the net present value (NPV) of the investment under a period of falling inflation? d. From your answers in (a), (b), and (c), what…
You found an investment opportunity to deposit $15,000 every year for 10 years into an account earning8%. You estimate general inflation to be 3% per year. What is the dollar value of your account at the endof 10 years in today’s real dollars?
(a) Calculate the perpetual equivalent annual worth in future dollars for years 1 through ∞ for income of $50,000 now and $5000 per year thereafter. Assume the market interest rate is 8% per year and inflation averages 4% per year. All amounts are quoted as future dollars. (b) If the amounts had been quoted in CV dollars, what is the annual worth in future dollars?
An investor lends $10,000 today, to be repaid in a lump sum at the end of10 years with interest at 10% (= im) compounded annually.What is the real rate of return, assuming that the general price inflation rate is 8% annually?
The average cost of a certain model car was $22,000 ten years ago. This year the average cost is $35,000. (a) Calculate the average monthly inflation rate (fm) for this model. (b) Given the monthly rate fm, what is the effective annual rate, f, of inflation for this model? (c) Estimate what these will sell for 10 years from now, expressed in today’s dollars.
If the inflation rate is expected to be 3% for the next 10 years, what annual income will be needed 10 years from now in order to have the same purchasing power as $25,000 today?