Question

Using the information provided in the following​ table, find the value of each​ asset:

The value of Asset A is ​

The value of Asset B

The value of Asset C

The value of Asset D

The value of Asset E

Asset	End of Year	Amount		Appropriate required return
A	1	​$	7,000	8​%
	2		7,000
	3		7,000
B	1 through∞	​$	500	4​%
C	1	​$	0	5​%
	2		0
	3		0
	4		0
	5		48,000
D	1 through 5	​$	1,200	4​%
	6		8,200
E	1	​$	3,000	7%

Answer 1

Value of Asset A = Cash Flow * Present value of discounting factor ( Rate, Time)

= $ 7000 * 1/(1.08) ^ 1 +$ 7000 * 1/(1.08) ^2+$ 7000 * 1/(1.08) ^ 3

= $ 18,039.68

Hence the correct answer is $ 18,039.68

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Value of Asset B = Cash Flow / Rate of Interest

= $ 500 / 4%

= $ 12,500

Hence the correct answer is $ 12,500

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Value of Asset C= Cash Flow * Present value of discounting factor ( Rate, Time)

= $ 48,000 * 1/(1.05) ^ 5

= $ 37,609.26

Hence the correct answer is $ 37,609.26

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Value of Asset D= Cash Flow * Present value of discounting factor ( Rate, Time)

= $ 1200 * 1/(1.04) ^ 1 + $ 1200 * 1/(1.04) ^2+$ 1200 * 1/(1.04) ^3+$ 1200 * 1/(1.04) ^4+$ 1200 * 1/(1.04) ^5+$ 8200 * 1/(1.04) ^6

= $ 11,822.77

Hence the correct answer is $ 11,822.77

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Value of Asset E= Cash Flow * Present value of discounting factor ( Rate, Time)

= $ 3,000 * 1/(1.07) ^ 1

= $ 2803.74

Hence the correct answer is $ 2,803.74