Consider a geometric series of cash flows whose first cash flow occurs at time 15 and continues through time 33. The first cash flow has a magnitude of $12.500 and this amount increases by 10 each period. Find the present (time 0) equivalent value of this series if the interest rate is 8% per

Consider a geometric series of cash flows whose first cash flow occurs at time 15 and continues through time 33. The first cash flow has a magnitude of $12.500 and this amount increases by 10 each period. Find the present (time 0) equivalent value of this series if the interest rate is 8% per

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 4MC: Suppose the free cash flow at Time 1 is expected to grow at a constant rate of gL forever. If gL <...

See similar textbooks

Related questions

Q: Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate b...

A: The price for bond implies to the consideration amount paid by investor for purchasing bond. It is t...

Q: Determine the amount of interest on a 60-day note for $477.00 with interest at 6.18% per annum. Igno...

A: The amount of compound Interest is calculated on the basis of number of days. Compounding is a metho...

Q: Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate b...

A: The price for bond implies to the consideration amount paid by investor for purchasing bond. In prov...

Q: Caren Rodriguez borrows P1,500 with simple interest at 3% per month. What payment at the end of 10 m...

A: Borrowed amount (P) = P 1,500 Monthly interest rate (r) = 3% Monthly period (t) = 10 Months

Q: Discuss the importance of market efficiency, and explain why some markets are more efficient than ot...

A: Market efficiency is defined as the degree, where the market prices used to get reflected as per the...

Q: Local Co. has sales of $10.3 million and cost of sales of $6.1 million. Its selling, general and adm...

A: Answer - Part A - Given, Sales = $10.30 million Cost of goods sold = $6.10 million So, Gross ...

Q: Use the savings plan formula to answer the following question. A friend has an IRA with an APR of 6....

Q: Your employer, a midsized human resources management company, is considering expansion intorelated f...

A: The dividend discount model (DDM) is a mathematical method for predicting a company's stock price ba...

Q: QUESTION 12 Consider a 4-year 5% coupon bond selling for $102. The yield to maturity is 4%, and the ...

A: The price for bond implies to the consideration amount paid by investor for purchasing bond. In prov...

Q: Net margin is 30% of the gross sales of 150,000. With Cost of Goods Sold amounting to 50,000, what p...

A: Net margin = 30% Gross sales = 150000 COGS = 50000

Q: Suppose the current value of an asset is $4,876, and 12 years ago the same asset was worth $7,272. T...

A: Value before 12 years (P) = $7272 Value now (F) = $4876 Period (n) = 12 Years

Q: Which statement is TRUE regarding the riskiness of money market instruments and capital market instr...

A: Money Market instruments are those instruments which are traded with a maturity of less than an year...

Q: Statement 1: When a taxpayer receives a car from a corporation for furnishing the names of potential...

A: Taxation is defined as the compulsory financial charge, which is levied by the taxing authority or t...

Q: What is the direct labor rate variance? What is the direct labor time variance?

A: Variance analysis is the analysis of actual and budgeted figures of production and related activitie...

Q: A 6 percent corporate coupon bond is callable in five years for a call premium of one year of coupon...

A: The amount that is received by the bond holder above the par value of the bond when the bond is call...

Q: 8. Calculating Annuity Values For each of the following annuities, calculate the future value. Annua...

A: a) Annual payment (A) = $2100 r = 8% n = 10 years

Q: Suppose that Jerry's 401(k) will have an average APR of 8% for 40 years. Assume both he and his empl...

A: Investments made by investors earn returns in the form of interest. The accumulated value of the inv...

Q: Identify the term being referred to: A theory that states that how high or low an entity pays out d...

A: Solution:- There are two theories related to dividend- Dividend relevance theory and dividend irrel...

Q: (Common stock valuation) You intend to purchase Dorchester common stock at $51.00 per share, hold it...

A: Purchase price of stock (P0) = $51.00 Dividend (D1) = $6.25 Required return (r) = 15%

Q: As interest rates rise, the duration of a perpetuity bond decreases. true or false

A: Rate of interest is defined as an amount of interest, which is due per period with an proportion of ...

Q: On December 31, 2015, Martin Corp invested in Marlin’s 5-year, $200,000 bond with a 5% interest rate...

A: Market interest rate is the yield to maturity of the bond. It is the rate which the invetsors will g...

Q: Kirk Van Houten, who has been married for 22 years, would like to buy his wife an expensive diamond ...

A: The amount Kirk has today is the present value = $4,650 The amount of ring cost in 8 years is the fu...

Q: DIRECTIONS. Analyze the situation and answer the question on a separate sheet of раper. One of the V...

A: Capital Structure of a company is the mix of debt and equity the business is using. Hence, the total...

Q: Future-looking interest rate expectations for 5 periods are as follows: 3%, 4%, 3.5%, 4.5%, 4%. Addi...

Q: On his 48th birthday, a man wants to set aside enough money to provide an income of $2500 at the end...

A: Present Value of Ordinary Annuity refers to a concept which determines the value of cash flows at pr...

Q: One of the mutually exclusive alternatives below must be selected Base your recommendation on A(Saue...

A: Incremental IRR It is used to analysis return over investment on two competing investment opportuni...

Q: Suppose you have a 40% chance of making $30 and a 60% change of making $70. If your Utility Function...

A: A risk premium is the yield on the asset which is more than the risk free rate of return. This premi...

Q: company X has 100 shares outstanding. It earns $2,000 per year perpetually and announces that it wil...

A: Share Repurchase: Share repurchase is also known as buyback where a company decides to purchase its...

Q: AN 8% corporate bond is due in 10 years. Required: a) Calculate the price of the bond if the nominal...

A: The price of bond is the sum of present value of all coupons payment and present value of face value...

Q: suggests that an increase in the dividend growth rate will increase the value of a stock. However, a...

A: The stock price which is the maximum price to be paid for share consists of dividends and terminal v...

Q: You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly p...

A: We can calculate the effective annual interest rate by applying the required formula taking the loan...

Q: Calculating Annuity Values For each of the following annuities, calculate the present value. Annuity...

A: Annuity is a sequence of equal amount of payments made at regular time gaps for a specified period o...

Q: Ann found an apartment that costs $800,000 to buy. She will make a $100,000 down payment and get a m...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

Q: Sayang Selasih Berhad is given the following quotes: Spot rate US...

A: In order to get the covered interest arbitrage (CIA) opportunity, one should take advantage of the i...

Q: Problem 2: Leni Robredo was hired as an investment analyst for XYZ Corporation. The latter asked the...

Q: Jasmine Scents has been given two competing offers for short-term financing. Both offers are for bor...

A: Amount to be borrowed (X) = $15000 Discount rate for offer 1 = 8% Interest rate for offer 2 = 9%

Q: 4) The interest rate on conventional 1-year Treasury bonds is 7% and the interest rate on 1-year TIP...

Q: A business must raise $90,000 in 6 years. What should be the size of the owners' quarterly payment t...

A: We will apply the required formula to calculate the each quarterly payment using 6 years time and in...

Q: 29. There are three therapy options to treat stomach cancer, drugs A (the standard), B or C. The cos...

A: Cost of drug A = $ 5000 Cost of drug D = $ 6000 Incremental cost = $ 1000 Incremental cost utility ...

Q: ng an important business activity? How does it affect th

A: Step 1 The purpose of financial planning is to determine how the company will be able to meet its ...

Q: preceding one Posit.

A: Accumulation in finance refers to growing the size of a single asset position, the number of assets ...

Q: Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate b...

A: Given, Three bonds. Bond A, Bond B and Bond C.

Q: What is the horizon value at Year 4? What is the total net operating capital at Year 4? Which is lar...

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question...

Q: TOPIC: ENGINEERING ECONOMICS and Specific SYSTEMATICALLY. Show your COMPLETE solutions and BOX your ...

A: Interest amount (I) = Php 8000 Interest rate (r) = 7% Period (n) = 5 Years

Q: Question 1: What is the principal that will grow to $1600 at 5% compounded quarterly in 6 years and ...

A: Let the principal = X Final amount = $1600 Interest rate = 5% quarterly compounded

Q: A contract requires lease payments of $700 at the beginning of every month for 4 years. a. What is t...

A: We need to use present value of annuity due formula to calculate present value of contract. PV =PMT1...

Q: Gina and Tomas obtained a divorce effective May 1, 2018, In accordance with the divorce decree which...

A: A divorce settlement agreement is defined in law as a settlement which happens between two parties b...

Q: Bill needs a new car and can afford monthly car payments of $400. The interest rate on new car loans...

A: Time value of money The worth of an amount today is not the same after 5 years or 5 years ago. It is...

Q: Tacomas population in 2000 was about 200 thousand, and has been growing by about 8% each year. If th...

A: FV = PV * (1 + r)^nWhere FV = Future ValuePV = Present Value = 200,000r = rate of grow = 8%n = numbe...

Q: A company reports the following Infommation for the year. Net credit sales $110,000 12,000 98,000 Av...

A: Receivables turnover Ratio: The receivable turnover ratio is a kind of measuring ratio how the is ab...

Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Consider a geometric series of cash flows whose first cash flow occurs at time 15 and continues
through time 33. The first cash flow has a magnitude of $12,500 and this amount increases by 10%
each period. Find the present (time 0) equivalent value of this series if the interest rate is 8% per

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Consider a uniform series of cash flows. The first cash flow of $10,000 occurs at time 10 and the last cash flow in the series occurs at time 20. If the interest rate is 8% per period, what is the present equivalent (time = 0) of the series of cash flows?
Consider a series of cash flows that starts with $1,000 at the end of time 1 and decreases by $20 each period. The last cash flow in the series occurs at time 15. If the interest rate is 8% per period, what is the present equivalent (time = 0) of the series of cash flows?
Consider the cash flow shown in the graph and assume that the interest rate is 10%. What is the value of X at to ensure that cash flow shown has a future value of $1,500,000? Answer to the closest dollar.
Consider the following cash flow profile: Suppose the positive-valued cash flows are now replaced by a geometric series. If the cash flow at end of year 1 is $10,000, what geometric rate is required for the cash flow profiles to be equivalent? Interest is at a compounded annual rate of 6%.
Calculate the interest rate that gives a present value of 0 to the following cash flow diagram. Please show your work. Answer is 15.4%
Consider the following cash flow diagram. What value of C makes the inflow series equivalent to the outflow series at an interest rate of 10% compounded annually?
Assume that time is measured in years and that interest rates are constant. A cashflow of amount £1000 is paid each year, with the first payment made at time 1 and the last payment made at time 20. Using a constant effective interest rate of 3% per annum, calculate the present value at time 0 of the cashflows.
Determine the value of Z on the left-hand side of the cash flow diagram below that establishes equivalence with the right-hand side. The interest rate is 4% per year.
Consider the following cash flows. The interest rate is 10%. What is the duration (hint: you need PV)? Year 0 1 2 3 4 Cash flow 100 200 300 400
Given the cash flows in actual dollars provided in the following table, calculate the present worth value of actual cash flow. Assume that the market interest rate is 16% and the general inflation rate is at 4% each year. n 0 4 5 7 Cash Flow (in actual dollars) $20,500 $41,500 $36,500 $55,500 . In question 9, convert the cash flows to equivalent cash flow in constant dollars if the base year is time 0. Calculate the present worth value of constant cash flow.
Consider the following cash flow diagram. What is the value of X if the present worth of the diagram is $400 and the interest rate is 15% compounded annually? a. $246 b. $165 c. $200 d. $146.
Consider the cash flow series given in the accompanying table. What value of C makes the deposit series equivalent to the withdrawal series at an interest rate of 6% compounded annually?