Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 7, Problem 7.20E
To determine
The expected cash flows in the given scenarios and their comparison.
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Quantitative Problem: You own a security with the cash flows shown below.
0
$
0
1
2
3
640
375
250
310
If you require an annual return of 10%, what is the present value of this cash flow stream? Do not round intermediate calculations. Round your answer to the nearest
cent.
QI. KNOWLEDGE AND UNDERSTANDING
DRAWING CASH FLOW DIAGRAM
Draw the
ww m mm
cash flow diagram for the following :
1. Assume that you want to deposit an amount (BD120,000.00) into an account three
years from now in order to be able to withdraw BD750 per year for ten years
starting four years from now. Assume that the interest rate is 4.5% per year.
Construct the cash flow diagram.
2. Suppose that you want to make a deposit into your account now such that you can
withdraw an equal amount (A1) of BD300 per year for the first five years starting
one year after your deposit and a different annual amount (A2) of BD600 per year
for the following three years. With an interest rate (i) of 5.5% per year, construct the
cash flow diagram.
3. If you deposit BD1,500 now, BD3,600 three years, BD2000 seven years, and
BD1,800 nine years from now in a savings account that pays 10% interest, how
much would you have at the end of year 25? Construct the cash flow diagram.
Consider the following cash flows:
Year
Cash Flow
0
-$ 28,900
1
14,800
2
3
14,100
10,500
a. What is the profitability index for the cash flows if the relevant discount rate is 8 percent?
Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161
b. What is the profitability index if the discount rate is 13 percent?
Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161
c. What is the profitability index if the discount rate is 20 percent?
Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161
Answer is not complete.
0.181 ×
a. Profitability index
b. Profitability index
c. Profitability index
Chapter 7 Solutions
Intermediate Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - If interest is compounded more than once a year,...Ch. 7 - Prob. 7.4QCh. 7 - Can an ordinary annuity table be used to determine...Ch. 7 - Prob. 7.6QCh. 7 - Is the present value of an ordinary annuity more...Ch. 7 - Prob. 7.8QCh. 7 - Simple Interest. Assume Shafer Corporation...Ch. 7 - Compound Interest. Assume Shafer Corporation...
Ch. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Present Value of a Single Sum, Compound Interest....Ch. 7 - Future Value of a Single Sum, Compound Interest....Ch. 7 - Prob. 7.8BECh. 7 - Present Value of a Single Sum, Compounded Interest...Ch. 7 - Prob. 7.10BECh. 7 - Present Value of a Single Sum, Calculating Time...Ch. 7 - Future Value of an Ordinary Annuity. An...Ch. 7 - Future Value of an Annuity Due. Mariah Carey...Ch. 7 - Future Value of an Ordinary Annuity: Calculating...Ch. 7 - Present Value of an Ordinary Annuity. CB...Ch. 7 - Present Value of an Annuity Due, Semiannual...Ch. 7 - Prob. 7.17BECh. 7 - Ordinary Annuity, Annuity Due, Using Interest...Ch. 7 - Prob. 7.2ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Future Value of an Ordinary Annuity, Future Value...Ch. 7 - Single Sum, Solving for Other Variables. Two...Ch. 7 - Ordinary Annuity, Solve for Interest Rate,...Ch. 7 - Present Value, Note Payable Prices. Wiz Khalifa...Ch. 7 - Future Value of a Deterred Annuity. Lenny Shafer...Ch. 7 - Prob. 7.13ECh. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Future Value of an Annuity Due, Decision Making....Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.1PCh. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Present Value, Present Value of an Annuity Due,...Ch. 7 - Prob. 7.4PCh. 7 - Prob. 7.5PCh. 7 - Prob. 7.6PCh. 7 - Prob. 7.7PCh. 7 - Present Value of an Annuity Due, Deferred...Ch. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Future Value of an Ordinary Annuity, Deferred...Ch. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Prob. 7.12PCh. 7 - Prob. 7.13PCh. 7 - Prob. 7.14PCh. 7 - Prob. 7.15P
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