How much more is a perpetuity of $8,000 worth than an annuity of the same amount for 10 years? Assume an interest rate of 7% and cash flows at the end of each year. a. $99,212 b. $34,740 c. $58,097 d. $1,486.44

How much more is a perpetuity of $8,000 worth than an annuity of the same amount for 10 years? Assume an interest rate of 7% and cash flows at the end of each year. a. $99,212 b. $34,740 c. $58,097 d. $1,486.44

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 1P

See similar textbooks

Related questions

Q: Calculate the best one. firm. Specifically, you want the firm to target a the share price under the…

A: Dividend policy refers to the strategy a company uses to decide how much it will pay out to…

Q: Determine the interest payment for the following three bonds. (Assume a $1,000 par value.) (Round…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: In practice, a common way to value a share of stock when a company pays dividends is to value the…

A: Common stock is a financial security that depicts an ownership claim to a corporation. The price of…

Q: Shocktown Inc. paid a dividend of $1.20 last year. The company expects to increase the dividend at a…

A: Stock value is computed as the discounted value of future dividends from the stock. It is computed…

Q: New Energy Incorporated has a beginning inventory balance on January 1 of 25,000 units and desires…

A: Given information: Beginning inventory on January 1 is 25,000 units,Ending balance = 20% of the next…

Q: Portfolio analysis You have been given the expected return data shown in the first table on three…

A: Portfolio analysis refers to examining the financial results of an investment, i.e., the returns and…

Q: Consider a firm with an EBIT of $866,000. The firm finances its assets with $2,660,000 debt (costing…

A: EPS refers to the Earning per share , it is the earnign available to each and every individual unit…

Q: what is the bond value?

A: Bond valuation aims to determine the intrinsic value of a bond. It entails determining the present…

Q: e the attached present and future value tables to answer the following questions: Tom pays $2,400…

A: Present value is the equivalent value of money required today based on time value of money that is…

Q: The York Company has arranged a line of credit that allows it to borrow up to $45 milion at any…

A: Compound = n = Monthly = 12Monthly Interest Rate = r = 0.621%

Q: Suppose Stock A has the following returns over the last five years: 10%, 15%, -5%. -8%, and 5%. What…

A: The average return on stock can be referred to as the return that represents the value of return…

Q: Suppose you observe the following situation: Security Pete Corporation Repete Company Beta 1.25 .87…

A: SecurityBetaExpected returnPete corporation1.250.108Repete company0.870.082The market return and the…

Q: What is the effective annual yield of a bond with a maturity of 40 years, price of $934.33 and…

A: Here, ParticularsValuesFace value of the bond (FV) $ 1,000.00Current price of the bond (PV) $…

Q: Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one…

A: Given::Area= 12000 sq. yardWorking Notes (WN):WN # 1Bid AInstallation cost =…

Q: A corporation creates a sinking fund in order to have $910,000 to replace some machinery in 8 years.…

A: Periodic deposits commonly referred to as payments are the defined amount of money that an…

Q: You observe the following yield curve for Treasury securities: Maturity Yield 1 Year 1.50% 2 Years…

A: A forward rate is a predicted interest rate for a future period, based on current market conditions.…

Q: You purchase a $255,000 house and you pay 20 percent down. You obtain a fixed-rate mortgage where…

A: A series of payments made over a period at equal intervals of time is known as an annuity. The…

Q: What are some examples of global risk factors? What factors are most prevalent in today’s market?…

A: Global risk factors are outside forces and circumstances that might negatively affect the…

Q: (Expected rate of return and risk) Syntex, Inc. is considering an investment in one of two common…

A: Expected return of stock is computed as follows:-Expected return of stock = whereRi= return Pi =…

Q: A debt of $3000 is to be paid off in 6 years from now, but instead, it will be settled through three…

A: Here,Amount of Debt need to be repaid in 6 years from now is $3,000Fisrt Payment in Year 0 is…

Q: Jenny Corporation needs to raise $46 million to fund a new project. The company will sell shares at…

A: Floatation cost:Floatation cost refers to the expenses incurred by a company when it issues new…

Q: To generate early sales, a golf club wishes to offer a special price for golfer year's membership…

A: Future Value = fv = $1575Interest rate = r = 6.25%

Q: The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: The capital investment cost for a switchgrass-fueled ethanol plant with a capacity of 200,000…

A: To evaluate the cost(C) of a plant with a capacity of 550,000 gallons per year, we will use the…

Q: The Branson Corporation is considering a change in its cash-only policy. The new terms would be net…

A: Credit Cost = Price per unit as per new policy x Required ReturnIn the given case, the break even…

Q: Kartman Corporation is evaluating four different real estate investments. Management plans to buy…

A: The profitability index is used to determine the attractiveness of an investment. It is computed by…

Q: If D1=$1.2,g(which is constant)=5.5%, and Po=$30.00 what is the stock total return for the coming…

A: Let's understand the information provided in the question -D1 (Dividend in the current year)$1.2g…

Q: Portfolio return and standard deviation Personal Finance Problem Jamie Wong is thinking of building…

A: Stock LStock M201314%23%201416%22%201516%21%201618%20%201718%19%201818%18%The portfolio weights are…

Q: The level of the Syldavia market index is 21,900 at the start of the year and 26,400 at the end. The…

A: a. The return on the index over the year is computed as follows:

Q: Using the data in the following table,, estimate the: a. Average return and volatility for each…

A: The standard deviation is a statistical indicator of market volatility, which gauges how far prices…

Q: Consider a company with a Reddington Immune cash flow stream of assets and liabilities. The asset…

A: Net Present value method (NPV) considers the time value of money. It is excess of present value of…

Q: On September 30, 2024, the Techno Corporation issued 8% stated rate bonds with a face amount of $360…

A: The price of a bond is equal to the sum of the present value of coupon payments and the present…

Q: E9-13 (Algo) Computing Four Present Value Problems LO 9-7 On January 1 of this year, Skamania…

A: Present value refers to the value of future expected cash flows on current date. Present value can…

Q: Complete the ordinary annuity. (Do not round intermediate calculations. Round your final answer to…

A: Annuity refers to the contract made between the insurer and the insurance company in which a fixed…

Q: Crane Company is considering the replacement of a piece of equipment with a newer model. The…

A: Operating cost of old equipment = $150,000Operating cost of new equipment = $134,000Selling price of…

Q: If D1=$1.2,g(which is constant)=5.5% and Po=$40.00 what is the stocks capital gain yield for the…

A: Capital gain refers to a rise in the price of a stock owned by it. The rise in the price of a stock…

Q: Erna Corp. has 8 million shares of com is $73, and the book value per share is outstanding. The…

A: Current value of 1st bond = $93,500,000Current value of 2nd bond = $64,000,000Face value of 1st bond…

Q: Annual deposits of $600 are made at the end of each year for 24 years in a fund that pays 7% in the…

A: Future value of the money is the amount of deposit made and amount of interest accumulated over the…

Q: Determine the price of a $510,000 bond issue under each of the follow Note: Use tables, Excel, or a…

A: The current worth of the bond can be computed using the PV function in the Excel sheet where the par…

Q: Consider the following cash flows: Year 0 1 2 3 Cash Flow -$ 28,700 15,000 13,900 10,300 a. What is…

A: The profitability index is used to determine the attractiveness of an investment. It is computed by…

Q: You have been asked to analyze a healthcare company that pays a dividend—the most recent was $4.50.…

A: The DDM refers to the measurement of the stock price of the companies based on the future dividends…

Q: Cash flows that are directly associated with a project are called sunk costs. terminal costs. O…

A: Option 3) Incremental cash flows: Incremental cash flows are the additional cash inflows and…

Q: You are looking for an investment vehicle that has two characteristics. First, you want an incentive…

A: Mutual funds are pool of investment in which investment is done small units and this is managed by…

Q: H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed…

A: Net present value (NPV) is the difference between present value of all cash inflows and initial…

Q: Jasper Pernik is a currency speculator who enjoys "betting" on changes in the foreign currency…

A: A place where investors from different nations swap foreign currencies equivalent to the required…

Q: Select all the correct statements. a. The no-arbitrage price of a bond is equal to its present…

A: An investor can profit from price differences of a security or asset between several exchanges or…

Q: Kolby's Korndogs is looking at a new sausage system with an installed cost of $690,000 The asset…

A: The net present value (NPV) of a project refers to the difference between the initial investment of…

Q: Consider the following financial statement information for the Newk Corporation: Item Inventory…

A: 1.Operating cycle is calculated as follows:-Operating cycle = DIO+DSO2.Cash cycle is calculated as…

Q: Problem 4-17 Two-stage DCF model Company Z-prime's earnings and dividends per share are expected to…

A: Value of stock can be found as the present value of dividends and growth of dividends.Next year…

Q: what is the future value of a single payment of $10,000 after 4 pay periods using an interest rage…

A: Future value is the value of an investment or cash flow at a specified time in the future, based on…

Question

How much more is a perpetuity of $8,000 worth than an annuity of the same amount for
10 years? Assume an interest rate of 7% and cash flows at the end of each year.
a. $99,212
b. $34,740
c. $58,097
d. $1,486.44

Video Video

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: Introduction of the present value

VIEW

Step 2: Calculation of the difefrence between the present value of perpetuity and the annuity

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

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

You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
7) a. b. C. d. How much more is a perpetuity of $8,000 worth than an annuity of the same amount for 10 years? Assume an interest rate of 7% and cash flows at the end of each year. $99,212 $34,740 $58,097 $1,486.44
How much more is a perpetuity of $1,500 worth than an annuity of the same amount for 20 years? Assume an interest rate of 10% and cash flows at the end of each period. O $2,229.65 O $1,486.44 O $1,635.08 $2,000.00
How much more is a perpetuity of $6,000 worth than an annuity of the same amount for 10 years? Assume an interest rate of 9% and cash flows at the end of each year. a. $99,212 b. $34,740 c. $58,097 d. $28,161
What is the present value of an ordinary annuity that pays $1,000 per year for 4 years, assuming the annual discount rate is 7 percent? a. $3,051.58 b. $762.90 c. $3,624.32 d. $3,738.32 e. $3,387.21
How much will be the future value of a 5-year ordinary annuity which has annual payments of $200, evaluated at a 7.5% semi-annual interest rate? a. $3,828.34 b. $287.13 c. $1,161.68 d. $1,348.48
What is the future value of an ordinary annuity that pays $4,600 per year for 4 years? The appropriate interest rate is 7 percent. Answers: a. $10,000 b. $6,452 c. $20,423.74 d. $4,657 An investment will pay $600 at the end of each of the next 2 years, $700 at the end of Year 3, and $1,000 at the end of Year 4. What is its present value if other investments of equal risk earn 6 percent annually? Answers: a. $1,134 b. $5,324 c. $2,345.50 d. $2,569.77 *PLEASE SHOW ALL STEPS! CANNOT USE EXCEL TO SOLVE! CAN USE CALCULATOR FUNCTIONS!!
What is the present value of an annuity consisting of payments of $800 every month for 8 years, with the first cash flow occurring in one month, if the interest rate is 7% p.a., compounded monthly? Select one: a. $4889.84 b. $4777.04 c. $58678.05 d. $58649.67
What is the future value of an annuity due of $800 paid semi-annually for the next 7 years, with a yield of 5% p.a. compounded semi-annually? Select one: a. $13,215.16 b. $6,923.22 c. $11,200.00 d. $13,545.54
Find the future value of the ordinary annuity. PMT= $2500, i = 7.4% interest compounded quarterly for 15 years A. $270,775.36 B. $405,910.50 C. $64,792.52 D. $398,537.55
An annuity pays $54 per year for 28 years. What is the future value (FV) of this annuity at the end of those 28 years, given that the discount rate is 8%? A. $5,148.30 B. $7,207.62 C. $6,177.96 D. $3,088.98
Determine the present worth of annuity consisting of 6 payments of 120,000 each payment are made at the beginning of each year. Money is worth to 15% compounded annually. What is the presenr worth value? A. 521,258.61 B. 520,258.61 C. 523,258.61