Present Value

If an investment of $50,000 is made today carrying at an interest rate of 5%. What will be its value after 10 years?

Solutions

Expert Solution

Since the lumpsum investment is made at a time. The future value of the investment is to be found.

Present Value = $50,000

Number of years = 10

Rate of interest = 5%

The terms used in formulas are :

PV - Present Value

FV - Future Value

r - Rate of interest

n- number of years

$ \begin{align}FV &= PV(1+r)^n\\ &= \$50,000(1+0.05)^{10}\\ &= \$81,444.73 \end{align} $

Hence, the value of the investment after 10 years is $81,444.73

The value of the investment after 10 years is $81,444.73

Vinay answered 2 years ago

Next > < Previous

Related Solutions

PRESENT VALUE OF AN ANNUITY - (a) What is the present value of an asset that...

PRESENT VALUE OF AN ANNUITY - (a) What is the present value of an asset that pays $10,000 per year at the end of the next four years if the appropriate discount rate is 5 percent? What total return would you earn if you bought this asset and it paid its expected cash flows on time each year for the next four years? Prove that you earned the same return that you would have, had you put your money in...

Present value

Question 1 - How much money Helen need now to fund her travels? Question 2 - After speaking with a number of banks, Helen learnt she will only be able to invest her funds at 6%. How much does she need now to fund her travels?

The present value of an annuity due is equal to the present value of an ordinary...

The present value of an annuity due is equal to the present value of an ordinary annuity times (1 + i). Select one: True False

Using your Present Value for a Lump Sum, Present Value for an Annuity, Future Value of...

Using your Present Value for a Lump Sum, Present Value for an Annuity, Future Value of a Lump Sum and Future Value of an Annuity, create four separate problems (with solutions) that use each table. Therefore, you need one problem for each table but four problems in total. Please include formulas and explanations where needed. The tables aren't provided because it is however you want to do it (however, it does include the period and interest rate). (i.e) Can be...

Present value For the case shown in the following table, calculate the present value of the...

Present value For the case shown in the following table, calculate the present value of the cash flow, discounting at the rate given,and assuming that the cash flow is received at the end of the period noted. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Single cash flow- $148,000 discount rate- 13% end of period (years) - 7

Present Value of $ 1 at 12% for 8 years = 0.404 Present Value of an...

Present Value of $ 1 at 12% for 8 years = 0.404 Present Value of an annuity at 12% for 8 years = 4.968 Future Value of $1 at 12% for 8 years = 2.476 Future Value of an annuity at 12% for 8 years = 12.3 Vargas Products has settled a lawsuit for patent infringement. They will receive $60,000 per year for the next 8 years. They intend to put that money aside for a large R & D...

Present Value of $ 1 at 12% for 8 years = 0.404 Present Value of an...

Present Value of $ 1 at 12% for 8 years = 0.404 Present Value of an annuity at 12% for 8 years = 4.968 Future Value of $1 at 12% for 8 years = 2.476 Future Value of an annuity at 12% for 8 years = 12.3 Vargas Products is considering a capital project. Project A has net cash inflows of $56,000 annually for 8 years. What is the total amount they would be willing to invest if their expected...

Present Value & Future Value calculation

Calculate the required values and select the correct option.

Find the present value of the depreciation tax shield and the present value of the after-tax salvage value

Find the present value of the depreciation tax shield and the present value of the after-tax salvage value, if the annual depreciation is $6,000 for 5 years, the after-tax salvage value is $9,000, and the tax rate is 40%. The required rate of return is 10%. The lease lasts for 5 years. Present value of depreciation tax shield = $9,098 Present value of after-tax salvage value = $34,117 Present value of depreciation tax shield = $22,744 Present value of after-tax salvage value...

Net Present Value

NBA stars Kevin Durant and Chris Paul own a company that faces a 40% tax rate and uses a 14% discount rate. They just invested $677,000 in equipment for the banking app “Goalsetter” that would be depreciated on a straight-line basis to zero over the 6-year life of the project. The equipment will be salvaged for $182,000 at the end of the project. Kevin Durant and Chris Paul know that the project's operating cash flow will be $165,300 per year. What is the NPV of this project if it...

Subjects