Corporate Finance: A Focused Approach (mindtap Course List)
7th Edition
ISBN: 9781337909747
Author: Michael C. Ehrhardt, Eugene F. Brigham
Publisher: South-Western College Pub
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Question
Chapter 4, Problem 27P
Summary Introduction
To Determine: The present value of perpetuity at 7% and 14%.
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What is the present value of perpetuity of $100 per year if the appropriate discount rate is 7 percent? If interest rates in general were to double and the appropriate discount rate rose to 14 percent, what would happen to the present value of the perpetuity?
What is the future value of a 7%, 5 year ordinary annuity that pays 300 each year? If this was an annuity due, what would its future value be?
value of a future payment change
as the un
to recelpt is lengthened? As the interest rate increases?
What's the difference between an ordinary annuity and an annuity due? Why would you
prefer to receive an annuity due for $10,000 per year for 10 years than an otherwise
similar ordinary annuity?
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Chapter 4 Solutions
Corporate Finance: A Focused Approach (mindtap Course List)
Ch. 4 - Prob. 1QCh. 4 - Prob. 2QCh. 4 - An annuity is defined as a series of payments of a...Ch. 4 - If a firms earnings per share grew from 1 to 2...Ch. 4 - Prob. 5QCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5P
Ch. 4 - Prob. 6PCh. 4 - An investment will pay 100 at the end of each of...Ch. 4 - You want to buy a car, and a local bank will lend...Ch. 4 - Find the following values, using the equations,...Ch. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Find the future value of the following annuities....Ch. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Universal Bank pays 7% interest, compounded...Ch. 4 - Prob. 20PCh. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - A mortgage company offers to lend you 85,000; the...Ch. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 27PCh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Your company is planning to borrow 1 million on a...Ch. 4 - It is now January 1. You plan to make a total of 5...Ch. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - You want to accumulate 1 million by your...Ch. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MCCh. 4 - Prob. 5MCCh. 4 - Prob. 6MCCh. 4 - Prob. 7MCCh. 4 - Prob. 8MCCh. 4 - Prob. 9MCCh. 4 - Prob. 10MCCh. 4 - Prob. 11MCCh. 4 - Prob. 12MCCh. 4 - Prob. 13MC
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Similar questions
- Suppose you are going to receive Rs. 63,800 per year for five years. The appropriate interest rate is 7.3 What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due? Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are an annuity due? Which has the highest present value, the ordinary annuity or annuity due? Which has the highest future value? Will this always be true? Note- Answer all the parts of the questionarrow_forwardWhat is the present value of a constant perpetuity of $17 per year if the discount rate is 10 percent?arrow_forwardWhat is the present value of an ordinary annuity of $1,000 per year for 9 years discounted back to the present at 10 percent? What would be the present value if it were an annuity due?arrow_forward
- What is the present value of a perpetuity that pays 1,000 per year beginning 1 year from now if the appropriate interest rate is 5%?arrow_forwardSuppose you're going to receive $7800 per year for five years. the appropriate discount rate is 7.5%. A.What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due? B. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are in annuity due? C. Which has the higher present value, the ordinary annuity or the annuity due? Which has a higher future value? Will this always be true?arrow_forwardWhat's the future value of a 5%, 5 year ordinary annuity that pays $800 each year? If this was an annuity due, what would its future value be?arrow_forward
- Suppose you are going to receive $13,500 per year for five years. The interest rate is 8.4%a. What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due?b. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are annuity due?c. Which has the highest present value (future value), the ordinary annuity or annuity due?arrow_forwardWhy would you prefer to receive an annuity due for $10,000 per year for 10 yearsthan an otherwise similar ordinary annuity?arrow_forwardWhat is the present value of a $400 perpetuity if the interest rate is 8%? If interest rates doubled to 16%, what would its present value be? Round your answers to the nearest cent.arrow_forward
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