Question

**11. Part A) (Present value of a growing?
perpetuity)** What is the present value of a perpetual
stream of cash flows that pays ?$7,000 at the end of year one and
the annual cash flows grow at a rate of 4?% per year? indefinitely,
if the appropriate discount rate is 11?%? What if the appropriate
discount rate is 9?%? (Round to the nearest? cent.)

Part B) **(Loan amortization)** On December? 31,
Beth Klemkosky bought a yacht for ?$50,000. She paid ?$16,000 down
and agreed to pay the balance in 14 equal annual installments that
include both the principal and 8 percent interest on the declining
balance. How big will the annual payments? be?

On December? 31, Beth Klemkosky bought a yacht for ?$50,000 and paid ?$16,000 ?down, how much does she need to borrow to purchase the? yacht? ______$ ?(Round to the nearest? dollar.)

Answer #1

w6 11/12 (Related to Checkpoint 6.5) (Present value of a
growing perpetuity) What is the present value of a perpetual
stream of cash flows that pays $2 comma 500 at the end of year one
and the annual cash flows grow at a rate of 4% per year
indefinitely, if the appropriate discount rate is 13%? What if the
appropriate discount rate is 11%?

On December 31, Beth Klemkosky bought a yacht for $90,000. She
paid $12,000 down and agreed to pay the balance in 9 equal annual
installments that include both the principal and 6 percent interest
on the declining balance. How big will the annual payments be?
On December 31, Beth Klemkosky bought a yacht for $90,000 and
paid $12,000 down, how much does she need to borrow to purchase
the yacht?

What is the present value of a perpetual stream cash flows that
pays $4000 at the end of year one and the annual cash flows grow at
a rate of 2% per year indefinitely, if the appropriate discount
rate is 11%? What if the appropriate disscount rate is 9%?
A) If the appropriate discount rate is 11%, the present value of
the growing perpetuity is $_____? (Round to nearest cent)
B) If the appropriate discount rate is 9%, the present...

What is the present value of a perpetual stream of cash flows
that pays $1,500 at the end of year one and the annual cash flows
grow at a rate of 3% per year indefinitely, if the appropriate
discount rate is 14%? What if the appropriate discount rate is
12%?
A. If the appropriate discount rate is 14%, the present value
of the growing perpetuity is?
(Round to the nearest cent.)

What is the present value of a perpetual stream of cash flows that
pays $5,500 at the end of the year one and the annual cash flows
grow at a rate of 2% per year indefinitely, if the appropriate
discount rate is 13%? What if the appropriate discount rate is
11%?

Let PV be the present value of a growing perpetuity (the ‘time 1
perpetuity’) with an initial payment of C beginning one period from
now and a growth rate of g. If we move all the cash flows back in
time one period, the present value becomes PV*(1+r) Note that this
is the present value of a growing perpetuity with an initial
payment of C beginning today (‘time 0 perpetuity’).
Question: How do the cash flows of the time 1...

What is the present value (PV) today of a stable perpetuity that
pays $15,000 every 4 years, starting 2 years from today? The
appropriate annual discount rate is 19% p.a. Round
your answer to the nearest dollar.

10) Part A. ?(Annuity payments) Lisa Simpson
wants to have ?$1,600,000 in 60 years by making equal annual?
end-of-the-year deposits into a? tax-deferred account paying 8.50
percent annually. What must? Lisa's annual deposit? be? (Round to
the nearest? cent.)
Part B. (Present value of annuity? payments)
The state? lottery's million-dollar payout provides for $1.4
million to be paid in 20 installments of ?$70,000 per payment. The
first ?$70,000 payment is made? immediately, and the 19 remaining
?$70,000 payments occur at...

What is the present value of a growing perpetuity, where the
first payment of $28 occurs 6 months from now, after which payments
will grow at the constant rate of 1.2% per annum, and where the
interest rate is 11% p.a., compounded semi-annually?

(Related to Checkpoint 6.6)
(Present value of annuities and complex cash flows )
You are given three investment alternatives to analyze. The cash
flows from these three investments are as follows:
End of Year
A
B
C
1
$16,000
$16,000
2
16000
3
16000
4
16000
5
16000
$16,000
6
16000
80000
7
16000
8
16000
9
16000
10
16000
16000
Assuming an annual discount rate of 15 percent, find the
present value of each investment.
a. What is the...

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