Page. 117

Justin Edelstein
Page. 117
7)
FV= PV (1+r)t
Solving for t, we get: t=(FV/PV)/ (1+r)
Double Money
FV= $2$1(1.07)t
T= 2/1.07
T=10.24 Years
Quadruple Money
FV= $4=$1(1.07)t
T=4/1.07
T=20.49 Years
8)
FV= PV(1+r)t
R=(FV/PV)1/t-1
R=(6,450/1)1/116-1
R=7.86%
10)
PV=FV/(1+r)t
PV= 750,000,000/ (1.08)25
PV=$109,513,428.68
15)
FV=PV(1+r)t
R=(FV/PV)1/t-1
R=(10,311,500/12,377,500)1/4-1
R=-.0446 or -4.46%
Page. 153
1)
PV=FV/(1+r)
PV @10%= $950/1.10+$730/1.102+$1,420/1.103+$1,780/1.104=$3,749.57
PV @18%= $950/1.18+$730/1.182+$1,420/1.183+$1,780/1.184=$3,111.72
PV @24%= $950/1.24+$730/1.242+$1,420/1.243+$1,780/1.244=$2,738.56
3)
FV=PV(1+r)t
FV @ 8% = $910(1.08) 3 + $1,140(1.08)2 + $1,360(1.08) + $2,100 = $6,044.83
FV @ 11% = $910(1.11) 3 + $1,140(1.11)2 + $1,360(1.11) + $2,100 = $6,258.74
FV @ 24% = $910(1.24) 3 + $1,140(1.24)2 + $1,360(1.24) + $2,100 = $7,274.29
6)
PVA = C({1-{1/(1 + r)t]}/r)
PVA = $45,000{[1 – (1/1.0825) 9 ]/.0825}
PVA = $278,210.88
The present value of the revenue is greater than the cost, so the company can afford the equipment.
10)
PV = C / r
PV = $35,000 / .06
PV = $583,333.33
12)
EAR = [ 1 + (APR / m)]m-1
EAR = [ 1 + (.08 / 4)]4 – 1 = .0824 or 8.24%
EAR = [ 1 + (.18 / 12)]12 – 1 = .1956 or 19.56%
EAR = [ 1 + (.14 / 365)]365 – 1 = .1502 or 15.02%
EAR = [ 1 + (.10 / 2)]2 – 1 = .1025 or 10.25%
20)
PVA = C({1-{1/(1 + r)t]}/r)
$73,800 = $C[1 – {1 / [1 + (.062/12)]60} / (.062/12)]
C = $73,800 / 51.47757
C = $1,433.63

EAR = [ 1 + (APR / m)]m-1
EAR = [1 + (.062 / 12)]12 – 1
EAR = .0638 or