   Chapter 5, Problem 2P Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

Solutions

Chapter
Section Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

PRESENT VALUE What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually? Summary Introduction To determine: The present value of the security. Present Value of an Annuity: The present value of annuity refers to that value, which is the current value and on which the future value of annuity is determined. The calculation of the future value depends on the present value, which is calculated on a discounted rate. Explanation Solution: Given, The future value is$5,000

The interest rate is 7% paid annually.

The time period is 20 years.

Calculate the present value.

The formula to calculate the present value is,

PV=FV(1+I)N

Where,

• PV is the present value,
• FV is the future value,
• I is the interest rate and
• N is the time period.

Substitute \$5,000 for FV, 7% for I and 20 years for N

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its WACC is 125%. The company is considering the fo...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

How do unions affect the natural rate of unemployment?

Principles of Macroeconomics (MindTap Course List)

Why should policymakers think about incentives?

Essentials of Economics (MindTap Course List) 