Question

If the present value of $143 is $129, what is the discount factor?

If that $143 is received in year 5, what is the interest rate?

what is the PV of $200 received in:

a. Year 8 (at a discount rate of 4%)?

b. Year 8 (at a discount rate of 16%)?

c. Year 13 (at a diacount rate of 28%)?

d. Each of years 1 through 3 ( at a discount rate of 15%)?

Answer 1

DISCOUNT FACTOR=1/1(1+DISCOUNT RATE)^{NUMBER OF PERIOD}

SUPPOSE X IS DISCOUNTING RATE

=1/1(1+X)⁵

NOW 129=143*1/1(1+X)⁵

X=2

PUTTING VALUE OF X WE GET

DISCOUNT FACTOR=0.9057

A)

Formula for NPV

NPV = (Cash flows)/ ( 1+r)i

i- Initial Investment

Cash flows= Cash flows in the time period

NOW PV OF $200 AFTER 8 YEARS AT 4% DISCOUNT RATE =$146.14

B) NOW PV OF $200 AFTER 8 YEARS AT 16% DISCOUNT RATE =$61.01

C) NOW PV OF $200 AFTER 13 YEARS AT 28% DISCOUNT RATE =$8.08

D) NOW PV OF $200 AFTER 1 YEARS AT 15% DISCOUNT RATE =$173.91

AFTER 2 YEARS AT 15% DISCOUNT RATE =$151.23

AFTER 3 YEARS AT 15% DISCOUNT RATE =$131.50