Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 11QP
Summary Introduction
To calculate: The present value of the lottery
Introduction:
Present value refers to the current worth of the future
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What is the value today of $4,300 per year, at a discount rate of 10 percent, if the first
payment is received 6 years from today and the last payment is received 20 years from
today? (Do not round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Value today
7. Suppose you just won a lottery of $100 million, that will can be cashed out over 5 years ($20
million per year) starting from 2023 and ending in 2027. The ongoing interest rate is 10% and is
assumed to be fixed for that 5-year duration. If you choose to withdraw today instead of receiving
that 5-year income stream, you will receive only $65 million. Which option will give you higher
income? Calculate and state your argument.
EX.M.106
Use the future value tables to answer the following questions.
(Click here to access the PV and FV tables to use with this problem.)
Required:
Round your answers to the nearest dollar.
1. What is the value on January 1, 2027, of $75,000 deposited on January 1, 2020, which accumulates interest at 14% annually?
$___________
2. What is the value on January 1, 2025, of $15,000 deposited on July 1, 2020, which accumulates interest at 16% compounded quarterly?
$__________
3. How much interest will accumulate on an investment of $10,000 left on deposit for 7 years at 8% compounded annually?
$__________
Chapter 5 Solutions
Fundamentals of Corporate Finance
Ch. 5.1 - Prob. 5.1ACQCh. 5.1 - Prob. 5.1BCQCh. 5.1 - Prob. 5.1CCQCh. 5.2 - Prob. 5.2ACQCh. 5.2 - Prob. 5.2BCQCh. 5.2 - What do we mean by discounted cash flow, or DCF,...Ch. 5.2 - Prob. 5.2DCQCh. 5.3 - Prob. 5.3ACQCh. 5.3 - Prob. 5.3BCQCh. 5 - You deposited 2,000 in a bank account that pays 5...
Ch. 5 - Prob. 5.2CTFCh. 5 - Charlie invested 6,200 in a stock last year....Ch. 5 - Prob. 1CRCTCh. 5 - Compounding [LO1, 2] What is compounding? What is...Ch. 5 - Prob. 3CRCTCh. 5 - Compounding and Interest Rates [LO1, 2] What...Ch. 5 - Prob. 5CRCTCh. 5 - Prob. 6CRCTCh. 5 - Prob. 7CRCTCh. 5 - Prob. 8CRCTCh. 5 - Prob. 9CRCTCh. 5 - Prob. 10CRCTCh. 5 - Prob. 1QPCh. 5 - Prob. 2QPCh. 5 - Calculating Present Values [LO2] For each of the...Ch. 5 - Calculating Interest Kates [LO3] Solve for the...Ch. 5 - Prob. 5QPCh. 5 - Calculating Interest Rates [LO3] Assume the total...Ch. 5 - Prob. 7QPCh. 5 - Calculating Interest Rates [LO3] According to the...Ch. 5 - Calculating the Number of Periods [LO4] Youre...Ch. 5 - Prob. 10QPCh. 5 - Prob. 11QPCh. 5 - Prob. 12QPCh. 5 - Calculating Interest Rates and Future Values [LO1,...Ch. 5 - Calculating Rates of Return [LO3] Although...Ch. 5 - Prob. 15QPCh. 5 - Prob. 16QPCh. 5 - Calculating Present Values [LO2] Suppose you are...Ch. 5 - Prob. 18QPCh. 5 - Calculating Future Values [LO1] You are scheduled...Ch. 5 - Prob. 20QP
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