Allen

9.4 Find the following values assuming a regular, or ordinary, annuity:

 

a The present value of $400 per year for ten years at 10 percent

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

= $400 x 6.145

= $2,458.00

 

b The future value of $400 per year for ten years at 10 percent

= $400 x 15.937

= $6,374.80

 

c The present value of $200 per year for five years at 5 percent

= $200 x 4.329

= $865.80

d The future value of $200 per year for five years at 5

= $200 x 5.526

= $1,105.20

 

9.6 Consider the following uneven cash flow stream:

 

Year                                Cash Flow               PV Factor                    Present Value

0                                         $0

1                                        250                        0.909                           227.25

2                                        400                        0.826                           330.40

3                                        500                        0.751                           375.50

4                                        600                        0.683                           409.80

5                                        600                        0.621                           372.60

Total                                                       1,715.55

=======

a What is the present (Year 0) value if the opportunity cost (discount) rate is 10 percent?

$1,715.55

 

9.7 Consider another uneven cash flow stream:

 

9.7

Year Ca Year                                Cash Flow               PV Factor                    Present Value

0                                         $2,000                  1.000                           2,000.00

1                                           2,000                  0.909                           1,818.00

2                                                 0                   0.826                                  0.00

3                                           1,500                  0.751                             1,126.50

4                                           2,500                  0.683                           1,707.50

5                                           4,000                  0.621                           2,484.00

Total                                                       9,136.00

=======

a. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10  percent?

$9,136.00

b What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually

 

Year                                Cash Flow                           FV Factor                    Future Value

0                                         $2,000                  1.611                           3,222.00

1                                           2,000                  1.464                           2,928.00

2                                                 0                   1.331                                  0.00

3                                           1,500                  1.210                             1,815.00

4                                           2,500                  1.100                           2,750.00

5                                           4,000                  1.000                          4,000.00

Total                                                       14,715.00

=======

 

 

9.9 Assume that you just won $35 million in the Florida lottery, and hence the state will pay you 20 annual payments of $1.75 million each beginning immediately. If the rate of return on securities of similar risk to the lottery earnings (e.g., the rate on 20-year U.S. Treasury bonds) is 6 percent, what is the present value of your winnings?

 

Present Value of Annuity of Annuity of $1,750,000 for 20 years

 

Immediate Payment                                                    $ 1,750,000

Annuity for 19 years at 6% (1,750,000 x 11.158)      $19,526,500

Total                                                                $21,276,500

=========

 
"Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"