a.
To determine: The present value at the end of each year.
a.
Answer to Problem 28PS
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
Therefore the present value at the end of each year is $12.50 billion.
b.
To determine: The present value at the end of first year if the growth rate is 4%.
b.
Answer to Problem 28PS
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%
Therefore the present value at the end of first year if the growth rate is 4% is $25 billion.
c.
To determine: The present value at the end of 20 years.
c.
Answer to Problem 28PS
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:
Therefore the present value at the end of 20 years is $9.82 billion.
d.
To determine: The present value if spread evenly for 20 years.
d.
Answer to Problem 28PS
The present value if spread evenly for 20 years is $10.20 billion.
Explanation of Solution
Determine the continuous compounded rate
Therefore the continuous compounded rate is 7.70%.
Determine the present value if spread evenly for 20 years
Therefore the present value if spread evenly for 20 years is $10.20 billion.
Want to see more full solutions like this?
Chapter 2 Solutions
PRIN.OF CORPORATE FINANCE
- 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 annuityarrow_forwardYou put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.arrow_forwardYou put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.arrow_forward
- Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?arrow_forwardCalculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT