The present value at the end of each year.

Question

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Answer 1

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 2

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 3

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 4

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 5

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

Answer 6

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

Answer 7

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

Answer 8

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

Answer 13

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

Answer 14

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

Answer 15

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

Answer 20

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

Answer 21

c.

Summary Introduction

To determine: The present value at the end of 20 years.

Answer 22

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Answer 23

c.

Expert Solution

Answer 24

c.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

Answer 27

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

Answer 28

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

Answer 29

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Answer 30

d.

Expert Solution

Answer 31

d.

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion