FUND OF CORP FIN >CUSTOM<
11th Edition
ISBN: 9781308616384
Author: Ross
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Question
thumb_up100%
Chapter 6, Problem 6CRCT
Summary Introduction
To identify: The person who got the best deal
Introduction:
The installment is the total amount payable partly specified for an agreed period. It can be equal or unequal installments. An equal installment is paying the same specified amount over a particular time, whereas in unequal installments, the amount may increase or decrease for a specified period.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
4.13 Calculating Annuity Present Value An investment offers $5,200 per year for 15 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever?
8. How much would you invest today in order to receive $30,000 in each of the following independent scenarios:
10 years at 9%
8 years at 12%
14 years at 15%
24 years at 10%
complete the following table:
Present Value (PV)
Rate
Time (Years)
Future Value (FV)
A
?
9%
10
$30,000.00
B
?
12%
8
$30,000.00
C
?
15%
14
$30,000.00
D
?
10%
24
$30,000.00
PLEASE NOTE: All dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67).
Use the present value of $1 table in the verify that your answers above are correct:
Future Value (FV)
Rate
Time (Years)
FV Factor (from Table)
Present Value (PV)
A
$30,000.00
9%
10
?
?
B
$30,000.00
12%
8
?
?
C
$30,000.00
15%
14
?
?
D
$30,000.00
10%
24
?
?
PLEASE NOTE: All PV Factors will be rounded to three decimal places (i.e. 1.234). All dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67).
Present value (LO9-4)
4. You will receive $6,800 three years from now. The discount rate is 10 percent.
a. What is the value of your investment two years from now? Multiply $6,800 × (1/1.10) or divide by 1.10 (one year’s discount rate at 10 percent).
b. What is the value of your investment one year from now? Multiply your answer to part a by (1/1.10).
c. What is the value of your investment today? Multiply your answer to part b by (1/1.10).
d. Use the formula PV = FV x 1 / (1+i)^n to find the present value of $6,600 received three years from now at 10 percent interest.
Chapter 6 Solutions
FUND OF CORP FIN >CUSTOM<
Ch. 6.1 - Prob. 6.1ACQCh. 6.1 - Prob. 6.1BCQCh. 6.1 - Unless we are explicitly told otherwise, what do...Ch. 6.2 - In general, what is the present value of an...Ch. 6.2 - In general, what is the present value of a...Ch. 6.3 - If an interest rate is given as 12 percent...Ch. 6.3 - What is an APR? What is an EAR? Are they the same...Ch. 6.3 - Prob. 6.3CCQCh. 6.3 - What does continuous compounding mean?Ch. 6.4 - What is a pure discount loan? An interest-only...
Ch. 6.4 - What does it mean to amortize a loan?Ch. 6.4 - Prob. 6.4CCQCh. 6 - Two years ago, you opened an investment account...Ch. 6 - A stream of equal payments that occur at the...Ch. 6 - Your credit card charges interest of 1.2 percent...Ch. 6 - What type of loan is repaid in a single lump sum?Ch. 6 - Annuity Factors [LO1] There are four pieces to an...Ch. 6 - Prob. 2CRCTCh. 6 - Prob. 3CRCTCh. 6 - Present Value [LO1] What do you think about the...Ch. 6 - Prob. 5CRCTCh. 6 - Prob. 6CRCTCh. 6 - APR and EAR [LO4] Should lending laws be changed...Ch. 6 - Prob. 8CRCTCh. 6 - Prob. 9CRCTCh. 6 - Prob. 10CRCTCh. 6 - Prob. 11CRCTCh. 6 - Prob. 12CRCTCh. 6 - Prob. 1QPCh. 6 - Prob. 2QPCh. 6 - Prob. 3QPCh. 6 - Prob. 4QPCh. 6 - Calculating Annuity Cash Flows [LO1] If you put up...Ch. 6 - Calculating Annuity Values [LO1] Your company will...Ch. 6 - Calculating Annuity Values [LO1] If you deposit...Ch. 6 - Calculating Annuity Values [LO1] You want to have...Ch. 6 - Prob. 9QPCh. 6 - Calculating Perpetuity Values [LO1] The Maybe Pay...Ch. 6 - Prob. 11QPCh. 6 - Prob. 12QPCh. 6 - Calculating APR [LO4] Find the APR, or stated...Ch. 6 - Calculating EAR [LO4] First National Bank charges...Ch. 6 - Prob. 15QPCh. 6 - Prob. 16QPCh. 6 - Prob. 17QPCh. 6 - Calculating Present Values [LO1] An investment...Ch. 6 - EAR versus APR [LO4] Big Doms Pawn Shop charges an...Ch. 6 - Prob. 20QPCh. 6 - Calculating Number of Periods [LO3] One of your...Ch. 6 - Calculating EAR [LO4] Friendlys Quick Loans, Inc.,...Ch. 6 - Prob. 23QPCh. 6 - Calculating Annuity Future Values [LO1] You are...Ch. 6 - Calculating Annuity Future Values [LO1] In the...Ch. 6 - Prob. 26QPCh. 6 - Prob. 27QPCh. 6 - Prob. 28QPCh. 6 - Simple Interest versus Compound Interest [LO4]...Ch. 6 - Prob. 30QPCh. 6 - Prob. 31QPCh. 6 - Prob. 32QPCh. 6 - Calculating Future Values [LO1] You have an...Ch. 6 - Calculating Annuity Payments [LO1] You want to be...Ch. 6 - Prob. 35QPCh. 6 - Prob. 36QPCh. 6 - Prob. 37QPCh. 6 - Growing Annuity [LO1] Your job pays you only once...Ch. 6 - Prob. 39QPCh. 6 - Calculating the Number of Payments [LO2] Youre...Ch. 6 - Prob. 41QPCh. 6 - Prob. 42QPCh. 6 - Prob. 43QPCh. 6 - Prob. 44QPCh. 6 - Prob. 45QPCh. 6 - Prob. 46QPCh. 6 - Prob. 47QPCh. 6 - Prob. 48QPCh. 6 - Prob. 49QPCh. 6 - Calculating Present Value of a Perpetuity [LO1]...Ch. 6 - Prob. 51QPCh. 6 - Prob. 52QPCh. 6 - Calculating Annuities Due [LO1] Suppose you are...Ch. 6 - Prob. 54QPCh. 6 - Prob. 55QPCh. 6 - Prob. 56QPCh. 6 - Prob. 57QPCh. 6 - Prob. 58QPCh. 6 - Prob. 59QPCh. 6 - Prob. 60QPCh. 6 - Calculating Annuity Values [LO1] You are serving...Ch. 6 - Prob. 62QPCh. 6 - Calculating EAR with Points [LO4] The interest...Ch. 6 - Prob. 64QPCh. 6 - Prob. 65QPCh. 6 - Prob. 66QPCh. 6 - Prob. 67QPCh. 6 - Calculating Annuity Payments [LO1] This is a...Ch. 6 - Prob. 69QPCh. 6 - Prob. 70QPCh. 6 - Prob. 71QPCh. 6 - Calculating Interest Rates [LO4] A financial...Ch. 6 - Prob. 73QPCh. 6 - Prob. 74QPCh. 6 - Ordinary Annuities and Annuities Due [LO1] As...Ch. 6 - Calculating Growing Annuities [LO1] You have 40...Ch. 6 - Prob. 77QPCh. 6 - Prob. 78QPCh. 6 - Prob. 79QPCh. 6 - Prob. 80QPCh. 6 - Prob. 1MCh. 6 - Prob. 2MCh. 6 - Prob. 3MCh. 6 - Prob. 4MCh. 6 - Prob. 5MCh. 6 - Prob. 6M
Knowledge Booster
Similar questions
- 4. If you invest $12,000.00 today, how much will you have in the future under each of the following independent scenarios: 10 years at 9% 8 years at 12% 14 years at 15% 24 years at 10% Present Value (PV) Rate Time (Years) Future Value (FV) A $12,000.00 9% 10 ? B $12,000.00 12% 8 ? C $12,000.00 15% 14 ? D $12,000.00 10% 24 ? PLEASE NOTE: All dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67). Use the future value of $1 table in the Appendix B PV FV Tables Appendix B PV FV Tablesand verify that your answers above are correct: PV Rate Time (Years) FV Factor (from Table) Future Value (FV) A $12,000.00 9% 10 ? ? B $12,000.00 12% 8 ? ? C $12,000.00 15% 14 ? ? D $12,000.00 10% 24 ? ? PLEASE NOTE: All FV Factors will be rounded to three decimal places (i.e. 1.234). All dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67).arrow_forward2. I buy an investment for GBP 2,345,678.91 and sell it one week later for GBP 2,350,000.00. What is my yield?arrow_forwardQ10. We want to have $100,000 in 10 years for a Wedding. If we can make an investment paying 6% compounded quarterly, what single deposit made now will produce this future value? What is the name of the Table that we would use? 11. For the above problem: What Row would we be in? 12. For the above problem What Column would we be in? 13. What is the “factor” for this problem? 14. What is the answer to this problem?arrow_forward
- 222b. Suppose you were considering purchasing a $6300 machine today that would generate additional net profit of $2500 booked at the end of each year. Assuming you need a 10 percent annual return to justify the investment, would the investment be worth doing if you had only three years of payouts? Would your answer change if you only needed a 9 percent annual return on your investment ? Why or why not? You must use present value to demonstrate your answer, and show your work.arrow_forwardFuture Value solving for I Going back to the jeep problem, in 10 years, you'd like to have 200,000 to buy that jeepney but you only have 111,670. At what rate must your money be compounded annually for it to grow to 200,000 in 10 years? Future value solving for N Let's assume that the price of a new jeep will always be 200,000. You only have 77,520. How many years will it take for your initial investment to grow 200,000 if it is invested at 9% compounded annually?arrow_forward5. Solve the following two independent scenarios: A. How much must be invested now to receive $30,000 for 10 years if the first $30,000 is received one year from now and the rate is 8%? Future Value PV FV Tables Factor Present Value ? ? ? PLEASE NOTE: All FV Factors will be rounded to three decimal places (i.e. 1.234). All dollar amounts will be with "$" and commas as needed and rounded to whole dollars (i.e. $12,345). Using the appropriate EXCEL spreadsheet, the answer = ? PLEASE NOTE: The dollar amount will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67). B. Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate? Future Value PV FV Tables Factor Net Present Value ? ? ? PLEASE NOTE: All FV Factors will be rounded to three decimal places (i.e. 1.234). All dollar amounts will be with "$" and commas as needed and rounded to whole dollars (i.e.…arrow_forward
- Q10. We want to have $100,000 in 10 years for a Wedding. If we can make an investment paying 6% compounded quarterly, what single deposit made now will produce this future value? What is the name of the Table that we would use? 11. For the above problem: What Row would we be in? 12. For the above problem What Column would we be in? 13. What is the “factor” for this problem? 14. What is the answer to this problem? Varrow_forwardHow much would you be willing to pay today for an investment that would return P1,250 each year for the next 10 years, assuming a discount rate of 12 percent? A. P4,062.75B. P5,062.75C. P6,062.75D. P7,062.75E. None of the abovearrow_forward5) What is the present value (PV) of $50,000 received twenty years from now, assuming the interest rate is 6% per year?A) $32,500.00B) $13,251.70C) $15,590.24D) $27,282.92arrow_forward
- 11. You buy a new piece of equipment for $11,778, and you receive a cash inflow of $2,000 per year for 10 years. What is the internal rate of return?arrow_forwardQ15. Depending on whether or not she gets the city to build a new stadium, the owner of a pro-basketball team expects the team to be worth either $270 million next year or $120 million. There is a 60 percent chance she will get a new stadium. There is a buyer willing to pay $180 million for the team right now. However, the buyer will keep his offer open—until the stadium issue is resolved—if offered some form of compensation. If the interest rate is 5 percent, how much should she be willing to pay the potential buyer for a one-year option to sell the team (in million, for illustration, if the answer is $21,553,100, then you should answer 21.5531)?arrow_forwardQ2. An investment is expected to yield $300 in three years, $500 in five years and $300 in seven years. What is the present value of this investment if the opportunity rate is 5% per annum? a) $735 b) $885 C) $865 D) $900arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- PFIN (with PFIN Online, 1 term (6 months) Printed...FinanceISBN:9781337117005Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
PFIN (with PFIN Online, 1 term (6 months) Printed...
Finance
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning