Question

Different cash

flow.

  Given the cash inflow in the following​ table,

LOADING...

​, what is the present value of this cash flow at

5%​,

13%​,

and

24​%

discount​ rates?                                                                                                                                     

What is the present value of this cash flow at

5​%

discount​ rate?

  

​(Round to the nearest​ cent.)What is the present value of this cash flow at

13​%

discount​ rate?

 

​(Round to the nearest​ cent.)What is the present value of this cash flow at

24​%

discount​ rate?

Present

value.

  A​ smooth-talking used-car salesman who smiles considerably is offering you a great deal on a​ "pre-owned" car. He​ says, "For only

4

annual payments of

​$2,700​,

this beautiful 1998 Honda Civic can be​ yours." If you can borrow money at

8​%,

what is the price of this​ car? Assume the payment is made at the end of each year.

If you can borrow money at

8​%,

what is the price of this​ car?

Present

value.

  A​ smooth-talking used-car salesman who smiles considerably is offering you a great deal on a​ "pre-owned" car. He​ says, "For only

4

annual payments of

​$2,700​,

this beautiful 1998 Honda Civic can be​ yours." If you can borrow money at

8​%,

what is the price of this​ car? Assume the payment is made at the end of each year.

If you can borrow money at

8​%,

what is the price of this​ car?

Answer 1

First question is not answered since the cash flow table is not made available.

Second question:

Price of the car is the present value of annuity of $2,700 each (4 yearly payment)

Present value of annuity is calculated using the formula PVA= P*(1-(1+r)^-4)/r

Where

P= Periodical payments (given as $2,700,

n= Number of payments (given as 4) and

r= Rate of interest per period in decimals ( given as 8%)

Plugging the values,

Price of the car= 2700*(1-(1+0.08)^-4)/0.08

=2700* 3.312127 = $8,942.74