compounded annually. After five years‚ her savings account will be worth $5000. Assume she will not make any withdrawals. Given this‚ which one of the following statements is true? A) Samantha deposited more than $5600 this morning. B) The present value of Samantha’s account is $5600 C) Samantha could have deposited less money and still had $5600 in five years if she could have earned 5.5 percent interest. D) Samantha would have had to deposit more money to have $5600 in five years if she could
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Outline your sources and uses of funds for date 0 and date 1. (g) Will you loan your farm for a period for 23‚100 bushels of corn? Why? If you have no corn at date 0‚ and you decide to loan the farm‚ what will be your consumption plan? 1 2. Your life span is two periods. You are endowed with $500 today. You √have a production technology which can transform an investment of $I today into $40 I next year. Also‚ you can borrow at 33 31 % per annum and lend at 25% per annum. (a)
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………5 Present Value…………………………………………………………………………...5 Analysis Illustrations……………………………………………………………………6 Conclusion………………………………………………………………………………7 References……………………………………………………………………………....9 The purchase of an automobile is a very important financial transaction one can make. Not only is a car an expensive purchase‚ it also comes with a cost of maintenance‚ repair‚ and once it is driven off the dealers lot‚ the vehicle becomes an investment that readily depreciates in value. Most buyer looking
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According to Gitman (2009)‚ present value (annuity): = (‚ ) PVA = PMT x (PVIFA11%‚ 30) PVA = $20‚000 x (8.694) PVA = $173‚880 b. How much will you need today as a single amount to provide the fund calculated in part “a” if you earn only 9% per year during the 20 years preceding retirement? $30‚950.64 would be needed today to provide $173‚880 assuming only 9% is earned per year during the 20 years preceding retirement. According to Gitman (2009)‚ present value (single amount): = (‚ ) PV
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CHAPTER 2 How to Calculate Present Values Answers to Problem Sets 1. If the discount factor is .507‚ then .507*1.126 = $1 2. 125/139 = .899 3. PV = 374/(1.09)9 = 172.20 4. PV = 432/1.15 + 137/(1.152) + 797/(1.153) = 376 + 104 + 524 = $1‚003 5. FV = 100*1.158 = $305.90 6. NPV = -1‚548 + 138/.09 = -14.67 (cost today plus the present value of the perpetuity) 7. PV = 4/(.14-.04) = $40 8. a. PV = 1/.10 = $10 b. Since the perpetuity
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CHAPTER 2 How to Calculate Present Values Answers to Problem Sets 1. If the discount factor is .507‚ then .507*1.126 = $1 2. 125/139 = .899 3. PV = 374/(1.09)9 = 172.20 4. PV = 432/1.15 + 137/(1.152) + 797/(1.153) = 376 + 104 + 524 = $1‚003 5. FV = 100*1.158 = $305.90 6. NPV = -1‚548 + 138/.09 = -14.67 (cost today plus the present value of the perpetuity) 7. PV = 4/(.14-.04) = $40 8. a. PV = 1/.10 = $10 b. Since the perpetuity will be worth $10 in year
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Remaining maturity refers to: 6) Generally accepted accounting principles (GAAP) refers to 7) Original maturity refers to: 8) The firm’s assets in the balance sheet refer to: 9) Book value (or Net book value) refers to: 10) The return expected by equity investors is called the __________. 11) Assume that the par value of a bond is $1‚000. Consider a bond where the coupon rate is 9% and the current yield is 10%. Which of the following statements is true? 12) Preferred stock payment obligations are
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but corporations use 10-year treasuries 33% of the time‚ and also choose 10-30 year treasuries 33% of the time. By looking at the above number I thought using a 10 yeartreasury which currently had a yield of 5.39% was the best option available. K(cost of Equity)=RF+Beta(RM-RF) 5.870-5.39+0.8(6-5.39) Therefore the cost of equity is 5.870% For the dividend discount model the rate of growth is zero. Although (exhibit4) states that the value line forecast of dividend growth from 98-00 to ’04-’06
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SOLUTION MANUAL Solutions to end-of-chapter problems Engineering Economy‚ 7th edition Leland Blank and Anthony Tarquin Chapter 1 Foundations of Engineering Economy 1.1 The four elements are cash flows‚ time of occurrence of cash flows‚ interest rates‚ and measure of economic worth. 1.2 (a) Capital funds are money used to finance projects. It is usually limited in the amount of money available. (b) Sensitivity analysis is a procedure that involves changing various estimates to see if/how they affect
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million times per week. Wal-Mart operates under 69 different banners in 27 countries. With fiscal year 2012 sales of approximately $444 billion‚ Wal-Mart employs 2.2 million associates worldwide. In 2005 for this case the sales were approximately $285 billion and operated 4‚000 stores worldwide. Valuations Dividend Discount Method (DDM): The DDM is a procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained
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