EBK FUNDAMENTALS OF CORPORATE FINANCE A
10th Edition
ISBN: 8220102801363
Author: Ross
Publisher: YUZU
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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.
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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
EBK FUNDAMENTALS OF CORPORATE FINANCE A
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 - 5. Calculating Annuity Cash Flows [LO1] If you put...Ch. 6 - Prob. 6QPCh. 6 - Prob. 7QPCh. 6 - Prob. 8QPCh. 6 - Prob. 9QPCh. 6 - Prob. 10QPCh. 6 - Prob. 11QPCh. 6 - Prob. 12QPCh. 6 - Prob. 13QPCh. 6 - Prob. 14QPCh. 6 - Prob. 15QPCh. 6 - Prob. 16QPCh. 6 - Prob. 17QPCh. 6 - Prob. 18QPCh. 6 - Prob. 19QPCh. 6 - Prob. 20QPCh. 6 - Prob. 21QPCh. 6 - Calculating EAR [LO4] Friendlys Quick Loans, Inc.,...Ch. 6 - Prob. 23QPCh. 6 - Prob. 24QPCh. 6 - Prob. 25QPCh. 6 - Prob. 26QPCh. 6 - Prob. 27QPCh. 6 - Prob. 28QPCh. 6 - Prob. 29QPCh. 6 - Prob. 30QPCh. 6 - Prob. 31QPCh. 6 - Prob. 32QPCh. 6 - Prob. 33QPCh. 6 - Prob. 34QPCh. 6 - Prob. 35QPCh. 6 - Prob. 36QPCh. 6 - Prob. 37QPCh. 6 - Prob. 38QPCh. 6 - Prob. 39QPCh. 6 - Prob. 40QPCh. 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 - Prob. 50QPCh. 6 - Prob. 51QPCh. 6 - Prob. 52QPCh. 6 - Prob. 53QPCh. 6 - Prob. 54QPCh. 6 - Prob. 55QPCh. 6 - Prob. 56QPCh. 6 - Prob. 57QPCh. 6 - Prob. 58QPCh. 6 - Prob. 59QPCh. 6 - Prob. 60QPCh. 6 - Prob. 61QPCh. 6 - Prob. 62QPCh. 6 - Prob. 63QPCh. 6 - Prob. 64QPCh. 6 - Prob. 65QPCh. 6 - Prob. 66QPCh. 6 - Prob. 67QPCh. 6 - Prob. 68QPCh. 6 - Prob. 69QPCh. 6 - Prob. 70QPCh. 6 - Prob. 71QPCh. 6 - Prob. 72QPCh. 6 - Prob. 73QPCh. 6 - Prob. 74QPCh. 6 - Prob. 75QPCh. 6 - Prob. 76QPCh. 6 - Prob. 77QPCh. 6 - Prob. 78QPCh. 6 - Prob. 1MCh. 6 - Prob. 2MCh. 6 - Prob. 3MCh. 6 - Prob. 4MCh. 6 - Prob. 5MCh. 6 - Prob. 6M
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