Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Related questions
Question
![**Present Value Calculation Exercise**
Compute the present value of a $160 cash flow for the following combinations of discount rates and times: **(Do not round intermediate calculations. Round your answers to 2 decimal places.)**
| Present Value |
|---------------|
| a. \( r = 8\%, \, t = 10 \, \text{years} \) |
| b. \( r = 8\%, \, t = 20 \, \text{years} \) |
| c. \( r = 4\%, \, t = 10 \, \text{years} \) |
| d. \( r = 4\%, \, t = 20 \, \text{years} \) |
In this exercise, you will use the concept of present value to determine the current worth of a future cash flow. The present value is calculated using the formula:
\[ PV = \frac{FV}{(1 + r)^t} \]
where \( PV \) is the present value, \( FV \) is the future value ($160 in this case), \( r \) is the discount rate, and \( t \) is the time in years.
**Instructions:**
1. Use the formula to calculate the present value for each scenario.
2. Ensure intermediate calculations are not rounded.
3. Provide your final answers rounded to two decimal places.](https://content.bartleby.com/qna-images/question/f8c879c5-4abd-41e0-a23b-c4f185aff8d4/813a593d-ba24-4d9a-8e38-b196a1cd6cdc/q07tpk_processed.jpeg)
Transcribed Image Text:**Present Value Calculation Exercise**
Compute the present value of a $160 cash flow for the following combinations of discount rates and times: **(Do not round intermediate calculations. Round your answers to 2 decimal places.)**
| Present Value |
|---------------|
| a. \( r = 8\%, \, t = 10 \, \text{years} \) |
| b. \( r = 8\%, \, t = 20 \, \text{years} \) |
| c. \( r = 4\%, \, t = 10 \, \text{years} \) |
| d. \( r = 4\%, \, t = 20 \, \text{years} \) |
In this exercise, you will use the concept of present value to determine the current worth of a future cash flow. The present value is calculated using the formula:
\[ PV = \frac{FV}{(1 + r)^t} \]
where \( PV \) is the present value, \( FV \) is the future value ($160 in this case), \( r \) is the discount rate, and \( t \) is the time in years.
**Instructions:**
1. Use the formula to calculate the present value for each scenario.
2. Ensure intermediate calculations are not rounded.
3. Provide your final answers rounded to two decimal places.
Expert Solution
arrow_forward
Step 1 Given
As per the given information:
Cash flow - $160
Provided are different combinations of discount rates and times:
Step by stepSolved in 3 steps
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
- Compute the present value of a $240 cash flow for the following combinations of discount rates and times: (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. r=12%, t=8 years b. r=12%, t=16 years c. r = 6%, t= 8 years d. r=6%, t=16 years Present Valuearrow_forwardThe present value of cash flow A is $430 and the present value of cash flow B is $220. Find the present value of the combined cash if the discount rate is 5%.arrow_forwardFind the present values of the following cash flow streams at a 3% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 0 1 2 3 4 5 Stream A $0 $150 $400 $400 $400 $250 Stream B $0 $250 $400 $400 $400 $150arrow_forward
- sarrow_forwardWhat is the future value in year 5 of the following cash flows given a discount rate of 9%? Year 2 4 5 Cash Flow $862 $669 $905 (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)arrow_forwardWhat is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals.Year 0 cash flow = -116,000Year 1 cash flow = 28,000Year 2 cash flow = 43,000Year 3 cash flow = 38,000Year 4 cash flow = 41,000Year 5 cash flow = 40,000Year 6 cash flow = 37,000arrow_forward
- a. Find the present values of the following cash flow streams at a 6% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent. 1 3 4 Stream A $0 $150 $400 $400 $400 $300 Stream B $0 $300 $400 $400 $400 $150 Stream A: $ Stream B: $ b. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar. Stream A: $ Stream B: $arrow_forwardWhat is the discount rate at which the following cash flows have a NPV of $0? Answer in %, rounding to 2 decimals. Year 0 cash flow = -145,000 Year 1 cash flow = 35,000 Year 2 cash flow = 42,000 Year 3 cash flow = 43,000 Year 4 cash flow = 30,000 Year 5 cash flow = 41,000 Year 6 cash flow = 42,000arrow_forwardAssume $10,000 is the present value of the cash flows shown below at a discount rate of 10%. If the three missing cash flows are equal amounts, then the missing cash flow is 0 10% |--- 1 ? 2 ? 3 ? 4 --| $11,000 Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Numeric Responsearrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:9780134897264
Author:KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...
Finance
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...
Finance
ISBN:9780077861759
Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:McGraw-Hill Education