Consider a stream of cash flows, where you receive $2,000.00 per year for 20 years EXCEPT year 12 during which you receive only $1,000.00. If the current market rate of interest is 7.200% (compounded annually), then what is the present value of this stream of uneven cash flows? Hint: there are several ways to solve this problem but see if you can solve it using a single annuity formula.
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EXCEPT year 12 during which you receive only $1,000.00. If the current market rate of
interest is 7.200% (compounded annually), then what is the present value of this stream of
uneven cash flows? Hint: there are several ways to solve this problem but see if you can
solve it using a single
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Solved in 4 steps
- Simple Annuity Solve the following problems. Show a complete and detailed solution. What is asked? What are given? Formula to be used and a detailed solution. Write legibly and neatly. 1. What is the present worth of a P1000 annuity starting at the end of the third year and continuing to the end of the fourth year, if the annual interest rate is 15%? 2. Find the annual payment to extinguish a debt P15,000 payable for 6 years at 12% interest annually. 3. A factory operator bought a diesel generator set for P 20,000.00 and agreed to pay the dealer uniform sum at the end of each year for 5 years at 8.5% interest compounded annually, that the final payment will cancel the debt for principal and interest. What is the annual payment? 4. A man paid 10% down payment of P200,000 for a house and lot and agreed to pay the 90% balance on monthly installment for 60 months at an interest rate of 10% compounded monthly. Compute the amount of the monthly payment. 5. What is the accumulated amount of…Please answer this question: What is the value at the end of Year 3 of the following cash flow stream if interest is 4% compounded semiannually? (Hint: you can use the EAR and treat the cash flows as an ordinary annuity or use the periodic rate and compound the cash flows individually.) What is the PV? What would be wrong with your answer to parts I(1) and I(2) if you used the nominal rate, 4%, rather than the EAR or the periodic rate, I sow /2=4%/2=2%, to solve the problems?You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment? Group of answer choices The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000. The discount rate decreases. The riskiness of the investment's cash flows increases. The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years. The discount rate increases.
- What is the equivalent uniform annual payment for the following cash flows if the interest rate is 10%? Populate the following table and compute the equivalent uniform annual payment. Show all work and provide an explanation. Do not use Excel. [Hint: This problem is a mix of annuity, gradient, and a single future cash flows.] ΕΟΥ Cash Flows Annuity Gradient Future 1 $2,000 2 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $14,000 IN 3 st 4 5 6 7. 8 9 10Use the formula for the present value of an ordinary annuity or the amortization formula to solve the following problem. PV $10,000; i=0.02; PMT $250; n ? (Round up to the nearest integer.) n =This problem demonstrates the dependence of an annuity's future value on the size of the periodic payment. Suppose a fixed amount will be invested at the end of each year and that the invested funds will earn 5.3% compounded annually. What will be the future value of the investments after 15 years if the periodic investment is: (Do not round intermediate calculations and round your final answers to 2 decimal places.) Investment Future Value a. $2,300 per year $ b. S3, 300 per year $ c. S4, 300 per year $
- You are comparing two annuities. Annuity A pays $110 at the end of each year for 5 years. Annuity B pays $100 at the beginning of each year for 5 years. The rate of return on both annuities is 8 percent. Which one of the following statements is correct given this information? O Annuity B has both a higher present value and a higher future value than Annuity A. Annuity A has both a higher present value and a higher future value than Annuity B. O Annuity A has the same present value and future value as Annuity B.What is the equivalent uniform annual payment for the following investment if the interest rate is 10%? Populate the following table and compute the uniform annual payment. Show all work and provide a comment. [Hint: This problem is a mix of annuity, gradient, and a single future cash payment] ΕΟΥ Cash Flows 1 $4,000 2 $4,500 3 $5,000 4 $5,500 5 $6,000 60 $6,500 7 $7,000 00 8 $7,500 9 $8,000 10 $15,500 Annuity Gradient FutureSolve the problem. solve using the formula for the future value of an ordinary annuity. given the monthly payment, capital, the annual interest rate, are, and the number of monthly payments, antique, find the future value of the annuity. R=$1300; r = 8.5%; nt= 17 A) $24,398.04 B) $17,548.36 C) $23,397.81 D) $24,198.38 Please search only correct answer as I am | paying for this and I keep receiving incorrect one
- Suppose you are going to receive $11,000 per year for 8 years. The appropriate interest rate is 11 percent per year. Requirement 1: What is the present value of the payments if they are in the form of an ordinary (a)annuity (cash flow starts at the end of the first compounding period)? (Click to select) (b) What is the present value if the payments are an annuity due (cash flow starts at the beginning of the first compounding period)? (Click to select) Requirement 2: (a)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an ordinary annuity? (Click to select) (b)Suppose you plan to invest the payments for 8 years, what is the future value if the payments are an annuity due? (Click to select)Suppose you find an annuity that pays 8% annual interest, compounded annually. If you invest in this annuity and contribute $10, 000 annually for 10 years, how much money will be in the annuity after 10 years? Enter your answer rounded to the nearest hundred dollars and omit the dollar sign and comma (For example $122, 570.21 should be input as 122600.) Provide your answer below:Castle Company is considering an investment opportunity with the following expected net cash inflows: Year 1, $225,000; Year 2, $165,000; Year 3, $120,000. The company uses a discount rate of 9% and the initial investment is $325,000. F(Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Calculate the NPV of the investment. Should the company invest in the project? Why or why not? Use the following table to calculate the net present value of the project. (Enter any factor amounts to three decimal places, X.XXX.) Net Cash Inflow PV Factor (i = 9%) Years Year 1 Year 2 Year 3 Present value of each year's inflow: (n = 1) Present value of each year's inflow: (n=2) Present value of each year's inflow: (n = 3) Total PV of cash inflows Year 0 Initial investment Net present value of the project example Get more help. Present Value Reference Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8…