One year from today, the U.S. government will spend roughly $850 (in billions) on Medicare and Medicaid reimbursements to hospitals and medical care providers. Assume the relevant discount rate is 5%.If expenditures on Medicare and Medicaid continue to grow at an annual rate of 4%, what is the present value of all future government expenditure on these programs? Answer correctly with proper explanation

One year from today, the U.S. government will spend roughly $850 (in billions) on Medicare and Medicaid reimbursements to hospitals and medical care providers. Assume the relevant discount rate is 5%.If expenditures on Medicare and Medicaid continue to grow at an annual rate of 4%, what is the present value of all future government expenditure on these programs? Answer correctly with proper explanation

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 27P

See similar textbooks

Similar questions

Rocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection by time by 3 days. If Tocor could invets any released funds at 10.85 percent, should it use the lockbox system and what would be the savings/loss. Assume 365 days per year.
Tocor is considering the implementation of a lockbox collection system for its mid- western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection time by 3 days. If Tocor could invest any released funds at 10.85 percent, should it use the lockbox system? Assume 365 days per year.
The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The government is currently borrowing $100 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $200 billion per year. b. Show the impact on the market rate of interest, assuming that taxpayers do not anticipate any future tax increases. c. How would your conclusion differ if taxpayers fully anticipate future tax increases?
Budget planners for a certain community have determined that $9,235,400 will be required to provide all government services next year. The total assessed property value in the community is $122,500,000. What tax rate is required to meet the budgetary demands? (Express your answer as a tax rate per $100 and round to the nearest hundredth)
If 90,000 is invested in a fund on December 31, 2019, and 5 equal annual withdrawals of 23,138.32 are made starting on December 31, 2020, that will deplete the fund, what is the interest rate being earned if interest is compounded annually?
Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
If it cost $50,000 to attend a public university today, what would it cost to attend that same university 18 years from now assuming that the cost escalated at a rate of 6% per year (annual compounding)?
A pension fund is making an investment of $100,000 today and expects to receive $1,600 at the end of each month for the next five years. At the end of the fifth year, the capital investment of $100,000 will be returned. What is the internal rate of return compounded annually on this investment?
Buckeye Healthcare Corp. is proposing to spend $186,725 on an eight-year project that has estimated net cash flows of $35,000 for each of the eight years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Compute the net present value, using a rate of return of 12%. Use the table of present value of an annuity of $1 presented above. If required, round your answers to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of annual net cash flows $ Less amount to be invested Net present value $ b. Based on the analysis prepared in part (a), is the…
Your company wants to create a scholarship program that will cost $17,000 dollars a year. They will begin annually starting one year from now. 1) What amount must be invested today at 8.5% compounded annually to fund the scholarship program in perpetuity?
Suppose it costs $18,000 per year (in early 2014 dollars) for tuition, room, board, and living expenses to attend a public university in the Southeastern United States. Solve, a. If inflation averages 8% per year, what is the total cost of a four-year college education starting in 2024 (i.e., 10 years later)? b. Starting in January of 2014, what monthly savings amount must be put aside to pay for this four-year college education? Assume your savings account earns 6% per year, compounded monthly (0.5% per month).