Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. an investment will pay $50 at the end of each of t

An investment will pay $50 at the end of each of the next 3 years, $250...

Free

90.2K

Verified Solution

Question

Finance

An investment will pay $50 at the end of each of the next 3years, $250 at the end of Year 4, $350 at the end of Year 5, and$500 at the end of Year 6. If other investments of equal risk earn6% annually, what is its present value? Its future value? Do notround intermediate calculations. Round your answers to the nearestcent.

Present value: $   

Future value: $   

Answer & Explanation Solved by verified expert
3.7 Ratings (679 Votes)

CF
Discount rate 6.000%
Year 0 1 2 3 4 5 6
Cash flow stream 0 50 50 50 250 350 500
Discounting factor 1.000 1.060 1.124 1.191 1.262 1.338 1.419
Discounted cash flows project 0.000 47.170 44.500 41.981 198.023 261.540 352.480
NPV = Sum of discounted cash flows
NPV CF = 945.69
Where
Discounting factor = (1 + discount rate)^(Corresponding period in years)
Discounted Cashflow= Cash flow stream/discounting factor
Compounding rate 6.000%
Year 0 1 2 3 4 5 6
Cash flow stream 0 50 50 50 250 350 500
Compounding factor 1.419 1.338 1.262 1.191 1.124 1.060 1.000
Compounded cash flows   0.000 66.911 63.124 59.551 280.900 371.000 500.000
FV = Sum of compounded cash flows
FV= 1341.49
Where
Compunding factor = (1 + rate)^(Last period-Corresponding period in years)
Compounded Cashflow= Cash flow stream*compounding factor

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

An investment will pay $50 at the end of each of the next 3years, $250 at the end of Year 4, $350 at the end of Year 5, and$500 at the end of Year 6. If other investments of equal risk earn6% annually, what is its present value? Its future value? Do notround intermediate calculations. Round your answers to the nearestcent.Present value: $   Future value: $   

Other questions asked by students

Q

\"How would you define your musical identity? Did you have music classes in your early years that...

Civil Engineering
Q

Write a program that randomly generates 100 dates and store them into a vector. Use the...

Programming
Q

Which is not a true statement regarding HIV In an HIV infected person the number...

Biology
Q

We thought this was not going to end well, but to our surprise, the Good...

Biology
Q

In the figure below, O is the center of the circle. Name a secant of...

Geometry
Q

Next Problem 1 point The equation of the line that goes through the point 1...

Basic Math
Q

A marketing consultant is hired by a major restaurant chain that wants to investigate the...

Statistics
Q

Solve 17 5x 8 X

Statistics
Q

find the values of the variables for which the equality is correct x 3 42...

Algebra
Q

All liabilities, such as unpaid accounts, use the right side of the T-account for ...

Accounting
Q

Record a credit memo in the amount of $820 for an EFT in payment of...

Accounting
Q

3.What are some of the advantages and disadvantages of permitting auditors to provide nonaudit services...

Accounting