Connect Access Card for Financial Accounting: Information and Decisions
8th Edition
ISBN: 9781259662966
Author: John J Wild
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter B, Problem 7E
Summary Introduction
Concept Introduction:
Present value is the value of money today. Present value of money is calculated using the interest rate and period. The future value of money is multiplied with the present value factor to get the present value.
To calculate: the required interest rate to be earned.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Jones expects an immediate Investment of $95,824.80 to return $24,000 annually for five years, with the first payment to be received
one year from now. What rate of Interest must Jones earn? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s)
from the tables provided. Round "Table Factor" to 4 decimal places.)
Present Value
Annuity Payment
Table Factor
Interest Rate
%
An investment is expected to pay a return of $5,250 semi-annually (i.e. at the end of each six months) for the next five years. If an investor is willing to pay $40,000 for this investment, what effective rate of return is he earning?
An investor is considering an investment that will pay $2,170 at the end of each year for the next 10 years. He expects to earn a return
of 12 percent on his investment, compounded annually.
Required:
a. How much should he pay today for the investment?
b. How much should he pay if the investment returns are received at the beginning of each year?
(For all requirements, do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)
a. Present value of ordinary annuity
b. Present value of annuity due
Chapter B Solutions
Connect Access Card for Financial Accounting: Information and Decisions
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Jones expects an immediate investment of $57,466 to return $10,000 annually for eight years, with the first payment to be received one year from now. What rate of interest must Jones earn?arrow_forwardYou are looking at an investment that will make annual payments of $28,000, $32,000, $66,000, and $99,000 to you each year over the next four years, respectively. All payments will be made at the end of the year. If the appropriate interest rate is 3.6 percent, what is the value of the investment offer today?arrow_forwardAn investment promises to pay $7,000 at the end of each year for the next six years and $3,000 at the end of each year for years 7 through 10. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent. If you require a 15 percent rate of return on an investment of this sort, what is the maximum amount you would pay for this investment?$ Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 15 percent required rate of return?$arrow_forward
- Keith Riggins expects an investment of $125,473.50 to return $15,000 annually for several years. If Riggins earns a return of 10%, how many annual payments will he receive? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Present Value Annuity Payment = ון Table Factor Annual Payments paymentsarrow_forwardKen Francis is offered the possibility of investing $2,745 today; in return, he would receive $10,000 after 15 years. What is the annual rate of interest for this investment?arrow_forwardSuppose you are going to invest $11,000 per year for six years. The appropriate interest rate is 9 percent. What is the future value if the payments are made on the last day of the year? What if the payments are made on the first day of the year? a) $82,756.68; $90,204.78 b) $90,204.78; $82,756.68 c) $49,345.10; $53,786.16 d) $53,786.16; $49,345.10arrow_forward
- Keith Riggins expects an Investment of $45,636.60 to return $6,000 annually for several years. If Riggins earns a return of 10%, how many annual payments will he receive? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Present Value Annuity Payment Table Factor Annual Payments paymentsarrow_forwardTanya is considering an investment that will require an initial payment of 400,000 and additional payments of 100,000 and 50,000 at the end of years one and two, respectively. It is expected that revenue from this investment will be 150,000 per year for five years, beginning one year from the initial investment.Assuming an annual effective rate of 10%, calculate the net present value of this investment.arrow_forwardKeith Riggins expects an investment of $82,014 to return $10,000 annually for several years. If Riggins earns a return of 10%, how many annual payments will he receive?arrow_forward
- Thomas Taylor plans to invest $24,300 a year at the end of each year for the next seven years in an investment that will pay him a rate of return of 9.1 percent. How much money will Thomas have at the end of seven years? (Round factor values to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.) Future value of investment $arrow_forwardAn investment promises to pay $6,000 at the end of each year for the next three years and $4,000 at the end of each year for years 4 through 7. Use Table II and Table IV or a financial calculator to answer the questions. Round your answers to the nearest cent. If you require a 11 percent rate of return on an investment of this sort, what is the maximum amount you would pay for this investment?$ Assuming that the payments are received at the beginning of each year, what is the maximum amount you would pay for this investment, given a 11 percent required rate of return?$arrow_forwardWhat would you pay for an investment that pays you $30,000 at the beginning of each year for the next ten years? Assume that the relevant interest rate for this type of investment is 8%.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
General Structure of an Insurance Contract; Author: The Business Professor;https://www.youtube.com/watch?v=Pg47GBpcykE;License: Standard Youtube License