The present value at the end of each year.

Question

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Answer 1

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Students have asked these similar questions

3.) Find the present value of an annuity in perpetuity where payments are $1, 000 at the beginning of the first year, third year, etc. and payments are $1, 500 at the beginning of the second year, fourth year, etc. Here effective annual interest is 5%

Which table would you use to determine how much must be deposited now in order to provide for 5 annual withdrawals at the beginning of each year, starting one year hence? a. Future value of an ordinary annuity of 1 b. Future value of an annuity due of 1 c. Present value of an annuity due of 1 d. None of these answer choices are correct.

$360,000 is invested in a perpetuity at an interest rate of 5.2% per annum. a. Find the monthly payment that the perpetuity provides. b. After six years of monthly payments, how much money remains invested in the perpetuity?

Answer 2

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 3

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 4

Question

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

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Answer 5

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

Answer 6

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

Answer 7

Chapter 2, Problem 25PS

a.

Summary Introduction

To determine: The present value at the end of each year.

Answer 8

a.

Expert Solution

Answer to Problem 25PS

The present value at the end of each year is $12.50 billion.

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Determine the present value at the end of each year

Present Value=[Amount of InvestmentInterest Rate]=[$1 billion8%]=$12.50 billion

Therefore the present value at the end of each year is $12.50 billion.

Answer 13

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

Answer 14

b.

Summary Introduction

To determine: The present value at the end of first year if the growth rate is 4%.

Answer 15

b.

Expert Solution

Answer to Problem 25PS

The present value at the end of first year if the growth rate is 4% is $25 billion.

Answer 16

b.

Expert Solution

Answer 17

b.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Determine the present value at the end of first year if the growth rate is 4%

Present Value=[Amount of Investment(Interest Rate−Growth Rate)]=[$1 billion(8%−4%)]=$25 billion

Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.

Answer 20

c.

Summary Introduction

To determine: The present value at the end of 20 years.

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

Answer 21

c.

Summary Introduction

To determine: The present value at the end of 20 years.

Answer 22

c.

Expert Solution

Answer to Problem 25PS

The present value at the end of 20 years is $9.82 billion.

Answer 23

c.

Expert Solution

Answer 24

c.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Determine the present value at the end of 20 years

Excel Spreadsheet:

Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate), Chapter 2, Problem 25PS

Therefore the present value at the end of 20 years is $9.82 billion.

Answer 27

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

Answer 28

d.

Summary Introduction

To determine: The present value if spread evenly for 20 years.

Answer 29

d.

Expert Solution

Answer to Problem 25PS

The present value if spread evenly for 20 years is $10.20 billion.

Answer 30

d.

Expert Solution

Answer 31

d.

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Determine the continuous compounded rate

Continuous Rate=[LN(1+Rate)]=[LN(1+8%)]=7.70%

Therefore the continuous compounded rate is 7.70%.

Determine the present value if spread evenly for 20 years

Present Value=[Amount Invested×(1Rate)−(1(Rate×ert))]=[$1 billion×(17.70%)−(1(7.70%×2.71828(7.70%×20)))]=[$1 billion×12.98701−2.784173]=$10.20284 billion or $10.20 billion

Therefore the present value if spread evenly for 20 years is $10.20 billion.

Answer 34

Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQ Ch. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQ Ch. 2 - Prob. 6SQ Ch. 2 - Prob. 8SQ Ch. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Discount factors If the PV of 139 is 125, what is...

The present value at the end of each year.

To determine: The present value at the end of each year.

Answer to Problem 25PS

Explanation of Solution

To determine: The present value at the end of first year if the growth rate is 4%.

Answer to Problem 25PS

Explanation of Solution

To determine: The present value at the end of 20 years.

Answer to Problem 25PS

Explanation of Solution

To determine: The present value if spread evenly for 20 years.

Answer to Problem 25PS

Explanation of Solution

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Chapter 2 Solutions