Question

Needed into a excel page format

We need to use the basic time value of money function to calculate the answer to this question. According to th basic TVM function: PV = FV / (1 + r)n where FV is future value, PV is present value, r is the discount rate and n is the number of periods. PV = \frac{500}{(1 + 0.15)^1} + \frac{1000}{(1 + 0.15)^5} PV = 434.7826 + 497.1767 = $931.96 b. This is an ordinary annuity, the present value of which can be represented mathematically as: Here, for our question, P = $1,200, r = 10%, n = 5 years. Substituting the values in formula, we get: PV = 1200 * [\frac{1 - (1 + 0.10)^{-5}}{0.10}] PV = $4,548.94 c. Perpetual cashflows can be discounted and present value for them can be calculated using the formula below: PV = 100/8% PV = $1,250 d. This is an example a growing perpetuity, the present value for which can be calculated using the following formula: PV = 100/(8% - 3%) PV = $2,000

Answer 1