Cameron is going to receive an annuity for 41 years of $37,062, and Kennedy is going...

Cameron is going to receive an annuity for 41 years of $37,062, and Kennedy is going to receive a perpetuity of that same amount. If the appropriate discount rate is 8%, how much more are Kennedy's cash flows worth today than Cameron's cash flows? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Expert Solution

Present value of Cameron annuity =PVA 8%,41 *CF

= 11.96723 * 37062

= 443529.48

Present value of Kennedy perpetuity = Cash Flow /rate

= 37062/.08

= $ 463275

Value of kennedy's cash flow more than cameron's cash flow = 463275 -443529.48

= $ 19745.52

**Find present value annuity factor from present value annuity table at 8% for 41 periods.

**Annuity is for a fixed period whereas perpetuity is for indefinite period .

jeff jeffy answered 1 year ago

You receive an annuity immediate for 20 years, where for the first 10 years, payments are...

You receive an annuity immediate for 20 years, where for the first 10 years, payments are 1000 and then starting at the end of the 11th year increase by 10% (so the payment at the end of the 11th year is 1100. Find the accumulated value of the annuity if effective annual interest i = 7%.

You plan to retire in 40 years. After that, you want to receive an annuity of...

You plan to retire in 40 years. After that, you want to receive an annuity of 5000 per month for 25 years, beginning immediately upon retirement. If you can earn 6% per year, compounded monthly, how much must you invest at the end of each month before retirement?

rob has a pension plan and will receive a pension annuity of $19,000 for 19 years...

rob has a pension plan and will receive a pension annuity of $19,000 for 19 years starting next year. After 19 payments, the following year (t=20) she receives $10,000, which will then grow at 4% per year thereafter. His life expectancy from today is 40 years (he will receive 40 total payments). The interest rate is 8%. What are these two annuity payments worth today?

You are going to receive $213,000 in 30 years. What is the difference in present value...

You are going to receive $213,000 in 30 years. What is the difference in present value between using a discount rate of 10 percent versus 5 percent? Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Input your answer as a positive value. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Suppose you are going to receive $ 35,000 per year for 18 years at the beginning...

Suppose you are going to receive $ 35,000 per year for 18 years at the beginning of each year. Compute the present value of the cash flows if the appropriate interest rate is 14 percent. Round it two decimal places, and do not include the $ sign, e.g., 123456.78.

Dr.Arrowhead will receive $150,000 per year for the next 20 years as an ordinary annuity payment...

Dr.Arrowhead will receive $150,000 per year for the next 20 years as an ordinary annuity payment for a high-tech slingshot weapon he invented. If a 6 percent rate is applied, should he be willing to sell out his future rights now for $2,000,000?

Would you prefer to receive an annuity due for $5,000 per year for 8 years or...

Would you prefer to receive an annuity due for $5,000 per year for 8 years or otherwise similar ordinary annuity? Interest rate is 7%. Explain numerically.

ADRENOCORTICAL INSUFFICIENCY: ADDISON’S DISEASE John Kennedy is a 41-YO father of two children and holds a...

ADRENOCORTICAL INSUFFICIENCY: ADDISON’S DISEASE John Kennedy is a 41-YO father of two children and holds a highly stressful job. Over the past 3 months, he has lost 15 lbs and experienced extreme fatigue. He has also noticed decreased body hair in the axillary and pubic regions, and his skin was very tanned although he has not had time to bask in the sun. In his physician’s office, John appeared very thin, with sunken eyes and decreased skin turgor. His supine...

Tommy John is going to receive $740,000 in three years. The current market rate of interest is 4%.

Present Value of Amounts Due Tommy John is going to receive $740,000 in three years. The current market rate of interest is 4%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar $ 657,857 b. Why is the present value less than the $740,000 to be received in the future? The present value is less due to Inflation over the 3 years.

Suppose you are going to receive $14,000 per year for 9 years. The appropriate interest rate...

Suppose you are going to receive $14,000 per year for 9 years. The appropriate interest rate is 10 percent. a. What is the present value of the payments if they are in the form of an ordinary annuity? b. What is the present value if the payments are an annuity due?

Question