Question

In: Finance

$100 is received at the beginning of year 1, $200 is receivedat the beginning of...

  1. $100 is received at the beginning of year 1, $200 is received at the beginning of year 2, and $300 is received at the beginning of year 3. If these cash flows are invested at 12 percent, what will their future value be at the end of year 3?

  2. What is the present value of a $25,000 perpetuity be if the discount rate (required rate of return) is 14 percent? (HINT: Excel does not have a built-in formula for perpetuity. You will need to use the formula for the present value of a perpetuity.)

  3. Bill plans to fund his individual retirement account (IRA) with the maximum contribution of $2,000 at the end of each year for the next 20 years. If Bill expects to earn 12 percent on his contributions, how much will he have at the end of the twentieth year?

Solutions

Expert Solution

Solution :- (a)

Future Value at the end of Year 3 =

= $100 * (1 + 0.12)3 + $200 * (1 + 0.12)2 + $300 * (1 + 0.12)3

= ( $100 * 1.405 ) + ( $200 * 1.2544 ) + ( $300 * 1.12 )

= $727.37

(b) Present Value of Perpetuity = Cash flow / Discount Rate = $25,000 / 0.14 = $178,571.4

(c) Value at the end of 20th Year = $2,000 * FVAF ( 12% , 20 )

= $2,000 * 72.053

= $144,106

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

what is the approximate future value of $100 to be received in one year, $200 in...
what is the approximate future value of $100 to be received in one year, $200 in two years, and $300 in three years, a 5% annual interest?
What is $100 today, plus $100 at the end of 1 year, plus $200 at the...
What is $100 today, plus $100 at the end of 1 year, plus $200 at the end of 2 years, plus $300 at the end of 3 years, worth to you today, given a discount rate of 4% What is $100 today, plus $100 at the end of 1 year, plus $200 at the end of 2 years, plus $300 at the end of 3 years, worth to you at the end of year 3, given a discount rate of...
What is the PV of $100 received in year 10 (at a discount rate of 1%)?...
What is the PV of $100 received in year 10 (at a discount rate of 1%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)      Present value $       b. What is the PV of $100 received in year 10 (at a discount rate of 13%)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)      Present value $       c. What is the PV of $100 received in year 15 (at a...
1. A regular deposit of $100 is made at the beginning of each year for 20...
1. A regular deposit of $100 is made at the beginning of each year for 20 years. Simple interest is calculated at i%per year for the 20 years. At the end of the 20-year period, the total interest in the account is $840. Suppose that interest of i% compounded annually had been paid instead. How much interest would have been in the account at the end of the 20 years? 2. Herman has agreed to repay a debt by using...
Consider a bank account where you make deposits of $100 at year 1, $200 at year...
Consider a bank account where you make deposits of $100 at year 1, $200 at year 5, and $200 at year 9. You do not remember the offered compound interest rate, but you know that the balance of your account right after the deposit at year 9 was twice the balance right after the deposit at year 5. Find the first time (in years) that the balance on your account reaches $1,000
True or False? 16 Year-end #1: Sales 200 with Cash 100 = + long-term debt 100...
True or False? 16 Year-end #1: Sales 200 with Cash 100 = + long-term debt 100 + capital stock 100 + opening retained earnings 0 + net income 50 + accounts payable 100 – accounts receivable 100 – inventory 50 - fixed assets 100. Year-end #2: Sales 400 with Cash 100 = + long-term debt 200 + capital stock 100 + opening retained earnings 50 + net income 50 + accounts payable 200 – accounts receivable 100 – inventory 100...
Exhibit 1 Company Share Beginning of year price Dividend per share End of year priceSprucer 200...
Exhibit 1 Company Share Beginning of year price Dividend per share End of year priceSprucer 200 $48.00$ 2.50 $47.00Holly Bush 500$ 9.00$ 1.00$ 9.25 Birchdale 400 $20.00 None $22.00 Oakview 300 $27.00 $1.25 $28.50   11.Use Exhibit 1. The table shows your stock positions at the beginning of the year, the dividends that each stock paid during the year, and stock prices at the end of the year.What is your portfolio percentage return? A.less than 7.85 percent B.more than 7.85 percent...
In a given year, a catchment with an area of 200 km2 received 1300 mm of...
In a given year, a catchment with an area of 200 km2 received 1300 mm of rainfall. The average evaporative energy flux due to evapotranspiration was 45 Watts/m2. Assuming negligible change in soil and groundwater storage, and also negligible interception. Estimate the average rate for that year, for the river draining the catchment (in both mm/year and m3/s).
In a given year, a catchment with an area of 200 km2 received 1300 mm of...
In a given year, a catchment with an area of 200 km2 received 1300 mm of rainfall. The average evaporative energy flux due to evapotranspiration was 45 Watts/m2. Assuming negligible change in soil and groundwater storage, and also negligible interception. Estimate the average rate for that year, for the river draining the catchment (in both mm/year and m3/s)
Ace Corp. had the following information for the year. Beginning Inventory at January 1       200 units...
Ace Corp. had the following information for the year. Beginning Inventory at January 1       200 units @ $160 per unit Inventory Purchase, March                400 units @ $180 per unit Inventory Purchase, August                300 units @ $200 per unit Inventory Purchase, October              25 units @ $21 per unit Ending Inventory at December 31      350 units What is Ace Corp’s: Cost of goods sold for the year, using FIFO? Ending inventory at December 31, using FIFO? Cost of goods sold for the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT