How to Calculate Present Values Essay Sample

Answers to Problem Sets

1. If the price reduction factor is. 507. so. 507*1. 126 = $ 1

2. 125/139 = . 899

3. PV = 374/ ( 1. 09 ) 9 = 172. 20

4. PV = 432/1. 15 + 137/ ( 1. 152 ) + 797/ ( 1. 153 ) = 376 + 104 + 524 = $ 1. 003

5. FV = 100*1. 158 = $ 305. 90

6. NPV = -1. 548 + 138/ . 09 = -14. 67 ( cost today plus the present value of the sempiternity )

7. PV = 4/ ( . 14- . 04 ) = $ 40

8. a. PV = 1/ . 10 = $ 10

B. Since the sempiternity will be deserving $ 10 in twelvemonth 7. and since that is approximately double the present value. the approximative PV peers $ 5.
PV = ( 1 / . 10 ) / ( 1. 10 ) 7 = 10/2= $ 5 ( about )

c. A sempiternity paying $ 1 starting now would be deserving $ 10. whereas a sempiternity get downing in twelvemonth 8 would be deserving approximately $ 5. The difference between these hard currency flows is hence about $ 5. PV = 10 – 5= $ 5 ( about )

d. PV = C/ ( r-g ) = 10. 000/ ( . 10- . 05 ) = $ 200. 000.

9. a. PV = 10. 000/ ( 1. 055 ) = $ 7. 835. 26 ( presuming the cost of the auto does
non appreciate over those five old ages ) .

B. You need to put aside ( 12. 000 ? 6-year rente factor ) = 12. 000 ? 4. 623 =
$ 55. 476.

c. At the terminal of 6 old ages you would hold 1. 086 ? ( 60. 476 – 55. 476 ) = $ 7. 934.

10. We did non cover uninterrupted intensifying so you do non necessitate to worry about this inquiry.

11. Lapp as 10.