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Unformatted text preview: Solutions to Ch. 2 Homework Problems 212 These problems can all be solved using a financial calculator by entering the known values shown on the time lines and then pressing the I/YR button. a. 1   +700749 With a financial calculator, enter: N = 1, PV = 700, PMT = 0, and FV = 749. I/YR = 7%. b. 1  700 +749 With a financial calculator, enter: N = 1, PV = 700, PMT = 0, and FV = 749. I/YR = 7%. c. 10   +85,000201,229 With a financial calculator, enter: N = 10, PV = 85000, PMT = 0, and FV = 201229. I/YR = 9%. d. 1 2 3 4 5       +9,0002,684.802,684.802,684.802,684.802,684.80 With a financial calculator, enter: N = 5, PV = 9000, PMT = 2684.80, and FV = 0. I/YR = 15%. 218 a. Cash Stream A Cash Stream B 1 2 3 4 5 1 2 3 4 5             PV = ? 100 400 400 400 300 PV = ? 300 400 400 400 100 With a financial calculator, simply enter the cash flows (be sure to enter CF = 0), enter I/YR = 8, and press the NPV key to find NPV = PV = $1,251.25 for the first problem. Override I/YR = 8 with I/YR = 0 to find the next PV for Cash Stream A. Repeat for Cash Stream B to get NPV = PV = $1,300.32. b. PV A = $100 + $400 + $400 + $400 + $300 = $1,600. PV B = $300 + $400 + $400 + $400 + $100 = $1,600. I/YR = ? I/YR = ? I/YR = ? I/YR = ? 8% 8% 219 a. Begin with a time line: 40 41 64 65     5,000 5,000 5,000 Using a financial calculator input the following: N = 25, I/YR = 9, PV = 0, PMT = 5000, and solve for FV = $423,504.48. b. 40 41 69 70     5,000 5,000 5,000 FV = ? Using a financial calculator input the following: N = 30, I/YR = 9, PV = 0, PMT = 5000, and solve for FV = $681,537.69. c. 1. 65 66 67 84 85      423,504.48 PMT PMT PMT PMT Using a financial calculator, input the following: N = 20, I/YR = 9, PV = 423504.48, FV = 0, and solve for PMT = $46,393.42. 2. 70 71 72 84 85      681,537.69 PMT PMT PMT PMT Using a financial calculator, input the following: N = 15, I/YR = 9, PV = 681537.69, FV = 0, and solve for PMT = $84,550.80. 220 Contract 1: PV = 4 3 2 ) 10 . 1 ( 000 , 000 , 3 $ ) 10 . 1 ( 000 , 000 , 3 $ ) 10 . 1 ( 000 , 000 , 3 $ 10 . 1 000 , 000 , 3 $ + + + = $2,727,272.73 + $2,479,338.84 + $2,253,944.40 + $2,049,040.37 = $9,509,596.34....
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This note was uploaded on 04/05/2009 for the course FIN 350 taught by Professor Chen during the Spring '07 term at S.F. State.
 Spring '07
 Chen

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