Question

Find the equivalent present value at year 0 of the following cash flows: An annuity with...

Find the equivalent present value at year 0 of the following cash flows:

  1. An annuity with an annual amount of $200, starting from end of year 3 to end of year 8, plus
  2. A lump sum cash flow of $1000 at the end of year 6.

Use an annual rate of 8%

Homework Answers

Answer #1

Ans A)

Annuity with an annual amount of $200 starting from end of year 3 to end of year 8

Discounting factor for given interest "i" and cash-flow anticipated in year T will be =(1/1+r)^T

We have to multiply future cash-flow with appropriate discount factors that is for cash flow at the end of year 3 will have present value at year 0=200*(1/1.08)^3 and similarly for all other cash flows anticipated

Total sum of all these discounted cash-flows would give present value at year 0

=200*(1/1.08)^3+200*(1/1.08)^4+200*(1/1.08)^5+200*(1/1.08)^6+200*(1/1.08)^7+200*(1/1.08)^8=$792.67

A lump sum cash-flow of $1000 at the end of year 6

=1000*(1/1.08)^6=$630.16

We can add these two cash flows PV to get total Present worth at time 0

Hope this helps best of luck

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Find the annual amount of a 5 year annuity, starting at end of year 3, by...
Find the annual amount of a 5 year annuity, starting at end of year 3, by converting the following cash flows to the above 5 year annuity: (a) an annuity with an annual amount of $220, starting from end of year 2 to end of year 6 plus (b) another annuity with an annual amount of $380 starting from end of year 5 to end of year 8. Use an annual interest rate 10%. (Show standard factor notation.)
What is the equivalent annual annuity for a 4-yr project with the following cash flows and...
What is the equivalent annual annuity for a 4-yr project with the following cash flows and a discount rate of 9%? Year Cash Flow 0 (175,000) 1 45,000 2 55,000 3 65,000 4 85,000 What is the payback period for a project with the following cash flows: Year Cash Flow 0 (175,000) 1 45,000 2 55,000 3 65,000 4 85,000 What is the net present value for a project with the following cash flows and a discount rate of 9%?...
The present value of an annuity of annual cash flows, each $7,000, starting in exactly one...
The present value of an annuity of annual cash flows, each $7,000, starting in exactly one year is $100,000. The rate at which the annuity is valued is 5% p.a. 1. How many cash flows will there be? 2. What is the amount of the last cash flow? Have a good try at this before watching the video and solution. Once you have the answer to part (1), you need to think very carefully about what it means before you...
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of...
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $2 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of the current year. (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))   Annual cash flows $     b. Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of...
Given the following cash flow, the closest equivalent present worth in year 0 at i=10%/year is:...
Given the following cash flow, the closest equivalent present worth in year 0 at i=10%/year is: End of Year 0 1 2 3 4 5 6 7 8 Cash Flow, $ 5000 0 0 0 500 500 500 500 500 Less than $6,200 Between $6,200-$6,500 Between $6,500-$6,800 Higher than $6,800
The following information is provided relating to a stream of cash flows: Year Amount of cash...
The following information is provided relating to a stream of cash flows: Year Amount of cash flow 1-4 $25,000 per year (payments at beginning of year) 5-10 $12,000 per year (payments at end of year) Assume an interest rate of 10% compounded annually. Calculate the present value of the stream of cash flows above. To answer this question use the present value table factors given below. No credit will be awarded for this question using a means other than the...
The following information is provided relating to a stream of cash flows: Year Amount of cash...
The following information is provided relating to a stream of cash flows: Year Amount of cash flow 1-4 $56,000 per year (payments at beginning of year) 5-10 $51,000 per year (payments at end of year) Assume an interest rate of 10% compounded annually. Calculate the present value of the stream of cash flows above. To answer this question use the present value table factors given below. No credit will be awarded for this question using a means other than the...
The following information is provided relating to a stream of cash flows: Year Amount of cash...
The following information is provided relating to a stream of cash flows: Year Amount of cash flow 1-4 $55,000 per year (payments at beginning of year) 5-10 $81,000 per year (payments at end of year) Assume an interest rate of 10% compounded annually. Calculate the present value of the stream of cash flows above. To answer this question use the present value table factors given below. No credit will be awarded for this question using a means other than the...
Consider a project with the following cash flows: Year 0: Cash flow = $500 Year 1:...
Consider a project with the following cash flows: Year 0: Cash flow = $500 Year 1: Cash flow = $0 Year 2: Cash flow = -$500 If the current market rate of interest is 8% per year, compounded annually, what is the value of this stream of cash flows expressed in terms of dollars at year 1?  (Note: This does not ask for the value as of year 0, but rather, as of year 1.) a. $0 b. $250 c. $133...
The present value of the following annual cash flows is $9,920.77. The cash flow at t=2...
The present value of the following annual cash flows is $9,920.77. The cash flow at t=2 is missing. Using an interest rate of 10%, find the value of the missing cash flow. Annual cash flows: $0 at time 0 and time 1, $4,000 at time 3, and $6,000 at time 4. $2500 $2750 $3000 $3250
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT