Question

An investment will pay you $500 a year for 8 years, (i.e., 8 payments), starting 7...

An investment will pay you $500 a year for 8 years, (i.e., 8 payments), starting 7 years from today. What is the present value of the investment at a discount rate of 8%? Show your work.

Homework Answers

Answer #1
Year Cash Flow PVF at 8% Present Value
0      500.00      1.0000                      500.00
1      500.00      0.9259                      462.96
2      500.00      0.8573                      428.67
3      500.00      0.7938                      396.92
4      500.00      0.7350                      367.51
5      500.00      0.6806                      340.29
6      500.00      0.6302                      315.08
7      500.00      0.5835                      291.75
Present Value                  3,103.19
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
Investment A will pay dividends of $2,700 per year for 5 years, whereas Investment B will...
Investment A will pay dividends of $2,700 per year for 5 years, whereas Investment B will pay dividends of $3,500 per year for 7 years. Which of these cash flow streams has the higher present value if the discount rate is 10%? Show your work
1. You are offered an investment that will pay $100 annually for 7 years (the first...
1. You are offered an investment that will pay $100 annually for 7 years (the first payment will be made at the end of year 1) plus $2,900 at the end of year 7. If the appropriate discount rate is 5%, assume annual compounding, what is the investment worth to you today? 2. You are offered an investment that will pay $100 annually for 7 years (the first payment will be made at the end of year 1) plus $2,900...
Consider an investment that will pay you $500 in the first year. This payment will grow...
Consider an investment that will pay you $500 in the first year. This payment will grow by 10 percent each year through year 12. Starting in year 13 it will pay you $1,200 annually for 15 years. After that, it will pay you nothing. If your required rate of return on this investment is 14 percent, how much would you be willing to pay for it today? Round your answer to the nearest whole dollar.
An investment promises to pay $5,000 at the end of each year for the next 7...
An investment promises to pay $5,000 at the end of each year for the next 7 years, $9,000 at the end of each year for years 8 through 20, and $3,000 at the end of each year for years 21 through 35. If you require a 10% annual rate of return on this investment, what is the present value of these cash flows at a 10% annual rate of return? Show time value of money equation and work.
Investment X offers to pay you $4650 per year for seven years, whereas Investment Y offers...
Investment X offers to pay you $4650 per year for seven years, whereas Investment Y offers to pay you $6 870 per year for four years. Which of these cash flow streams has the higher present value if the discount rate is 7%? If the discount rate is 21.5%?
A perpetuity will make $1000 payments at the end of each year starting from year 5...
A perpetuity will make $1000 payments at the end of each year starting from year 5 (i.e., first payment will occur at the end of year 5). If the discount rate is 7%, what is the present value of this perpetuity? Round your answer to the nearest dollar; do not include the $ sign (i.e., if the answer is $8,300.3562, enter it as 8,300).
Consider an investment that will pay you $1,000 each year for five years. After that, the...
Consider an investment that will pay you $1,000 each year for five years. After that, the payment will grow by 3 percent per year indefinitely, so that the payment in year 6 will be $1,030, the payment in year 7 will be $1,060.90, and so forth. If your required rate of return on this investment is 13 percent, what is the most you’d be willing to pay for it? If the investment costs you $8,000 today, what is its net...
You are valuing an investment that will pay you $24,000 per year for the first 6...
You are valuing an investment that will pay you $24,000 per year for the first 6 years, $28,000 per year for the next 10 years, and $54,000 per year the following 14 years (all payments are at the end of each year). If the appropriate annual discount rate is 6.00%, what is the value of the investment to you today?
3. Investment X offers to pay you $5,900 per year for nine years, whereas Investment Y...
3. Investment X offers to pay you $5,900 per year for nine years, whereas Investment Y offers to pay you $8,600 per year for five years. Calculate the present value for Investments X and Y if the discount rate is 4 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value Investment X $ Investment Y $ Calculate the present value for Investments X and Y if the discount rate is 14...
Investment X offers to pay you $5,400 per year for nine years, whereas Investment Y offers...
Investment X offers to pay you $5,400 per year for nine years, whereas Investment Y offers to pay you $7,700 per year for five years.    Calculate the present value for Investments X and Y if the discount rate is 6 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Present value   Investment X $      Investment Y $    Calculate the present value for Investments X and Y if the discount rate is 16...