A debtor offers to repay a debt by making a payment of $500 one year from...

A debtor offers to repay a debt by making a payment of $500 one year from today, $3,000 three years from today, and $4,000 four years from today. The lending agency would rather receive the money in 4 equal end of year payments. Assuming a TVOM of 6%, how much would the debtor need to pay to make these cash flows equivalent?

Expert Solution

Present value = ($500 / (1+6%)) + ($3000 / (1+6%)^3) + ($4000 / (1+6%)^4)
= $471.6981 + $2,518.8578 + $3,168.3746
= $6,158.93

Calculation of annual equal payment using Excel:
=PMT(rate,nper,pv,fv)
=PMT(6%,4,-6158.93,0)
= $1,777.41

Annual equal payment = $1,777.41

jeff jeffy answered 2 years ago

An investment offers €10,000 per year for 15 years, with the first payment occurring one year...

An investment offers €10,000 per year for 15 years, with the first payment occurring one year from now. If the required return is 10 per cent, a) What is the value of the investment? b) What would the value be if the payments occurred for 50 years? c) For ever?

An investment offers $5,500 per year for 15 years, with the first payment occurring one year...

An investment offers $5,500 per year for 15 years, with the first payment occurring one year from today. If the required return is 6%, what is the present value of the investment?

An investment offers $10,300 per year for 14 years, with the first payment occurring one year...

An investment offers $10,300 per year for 14 years, with the first payment occurring one year from now. Assume the required return is 11 percent. What is the value of the investment today? What would the value be if the payments occurred for 39 years?

Allysha just borrowed 35,800 dollars. She plans to repay this loan by making a special payment...

Allysha just borrowed 35,800 dollars. She plans to repay this loan by making a special payment of 6,400 dollars in 5 years and by making regular annual payments of 6,300 dollars per year until the loan is paid off. If the interest rate on the loan is 8.2 percent per year and she makes her first regular annual payment of 6,300 dollars in one year, then how many regular annual payments of 6,300 dollars must Allysha make? Round your answer...

Allysha just borrowed 38,900 dollars. She plans to repay this loan by making a special payment...

Allysha just borrowed 38,900 dollars. She plans to repay this loan by making a special payment of 5,100 dollars in 3 years and by making regular annual payments of 6,700 dollars per year until the loan is paid off. If the interest rate on the loan is 4.51 percent per year and she makes her first regular annual payment of 6,700 dollars in one year, then how many regular annual payments of 6,700 dollars must Allysha make? Round your answer...

n investment offers $6,900 per year for 10 years, with the first payment occurring one year...

n investment offers $6,900 per year for 10 years, with the first payment occurring one year from now. a. If the required return is 5 percent, what is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value today be if the payments occurred for 35 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What...

Suppose you plan to borrow $300,000 from a financial institution and you are required to repay the loan by making equal annual payments for five years (payment at the end of each year).

Suppose you plan to borrow $300,000 from a financial institution and you are required to repay the loan by making equal annual payments for five years (payment at the end of each year). The interest rate for the loan is 3.5% per year. Show your answers correct to two decimal points. Calculate the annual payment required. Prepare an amortization schedule for the loan for each year according to the following format. Year Beginning balance Annual payment Interest paid Principal...

Starting from year 1, Project A offers to pay you $500 every year for 10 years,...

Starting from year 1, Project A offers to pay you $500 every year for 10 years, whereas Project B offers to pay you $520 for the first year and a yearly increased amount for the next 8 years after year 1. Project B’s payment in year t+1 will be 2% higher than its payment in year t. In year 0, Project A costs $2200 while Project B costs $2250. If the discount rate for Project A is 10% and for...

Schwartz offers its customers payment terms of 1/10, n/30, where purchasers making payment within 10 days...

Schwartz offers its customers payment terms of 1/10, n/30, where purchasers making payment within 10 days of product receipt will receive a discount of 1% of the purchase price, or must pay the full balance due within 30 days. Schwartz has just received payment from a new customer who paid within the 10-day window and is thus entitled to the 1% discount. This discount will not result in a loss to Schwartz on the sale of the product. Required: 1....

A company wants to replay a $117,053 debt making $463 quarterly payment for 21 quarters, then...

A company wants to replay a $117,053 debt making $463 quarterly payment for 21 quarters, then one final payment. If the interest is 14 per year, compounded quarter, how much is the final payment?

Question