KP_Ch6HWSolns

KP_Ch6HWSolns - Chapter 6 VIII. Basic 6.1. Future Value...

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Chapter 6 VIII. Questions and Problems Basic 6.1. Future Value with Multiple Cash Flows: Konerko Inc. expects to earn cash flows of $13,227, $15,611, $18,970, and $19,114 over the next four years. If the company uses an 8 percent discount rate, what is the future value of these cash flows at the end of year 4? Solution: 0 1 2 3 4 ├───────┼────────┼───────┼────────┤ $13,227 $15,611 $18,970 $19,114 n = 4; i =8%. 6.2. Future Value with Multiple Cash Flows: Ben Woolmer has an investment that will pay him the following cash flows over the next five years - $2,350, $2,725, $3,128, $3,366, and $3,695. If his investments typically earn 7.65 percent, what is the future value of this set of cash flows at the end of five years? Solution: 0 1 2 3 4 5 ├───────┼────────┼───────┼────────┼───────┤ $2,350 $2,725 $3,128 $3,366 $3,695 n = 5; i =7.65%. $74,472.48 = + + + = + + + = 114 , 19 $ 60 . 487 , 20 $ 67 . 208 , 18 $ 21 . 662 , 16 $ 114 , 19 $ ) 08 . 1 ( 970 , 18 $ ) 08 . 1 ( 611 , 15 $ ) 08 . 1 ( 227 , 13 $ FV 1 2 3 4
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$17,498.75 = + + + + = + + + + = 695 , 3 $ 50 . 623 , 3 $ 89 . 624 , 3 $ 45 . 399 , 3 $ 91 . 155 , 3 $ 695 , 3 $ ) 0765 . 1 ( 366 , 3 $ ) 0765 . 1 ( 128 , 3 $ ) 0765 . 1 ( 725 , 2 $ ) 0765 . 1 ( 350 , 2 $ FV 1 2 3 4 5 6.3. Future Value with Multiple Cash Flows: You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts starting now in account paying 5.75 percent annually: $625, $700, $700, $750. How much will you have at the end of four years? Solution: 0 1 2 3 4 ├───────┼────────┼───────┼────────┤ $625 $700 $700 $750 n = 4; i =5.75%. $3,185.40 = + + + = + + + = 13 . 793 81 . 782 $ 83 . 827 $ 63 . 781 $ ) 0575 . 1 ( 750 $ ) 0575 . 1 ( 700 $ ) 0575 . 1 ( 700 $ ) 0575 . 1 ( 625 $ FV 2 3 4 4 6.4. Present Value with Multiple Cash Flows: Saul Cervantes has just purchased some equipment for his landscaping business. He plans to pay the following amounts at the end of the next five years: $10,450, $8,500, $9,675, $12,500, and $11,635. If he uses a discount rate of 10.875 percent, what is the cost of the equipment he purchased today? Solution: 0 1 2 3 4 5 ├───────┼────────┼───────┼────────┼───────┤ $10,450 $8,500 $9,675 $12,500 $11,635 n = 5; i =10.875%.
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$38,652.76 = + + + + = + + + + = 82 . 943 , 6 $ 33 . 271 , 8 23 . 098 , 7 $ 35 . 914 , 6 $ 03 . 425 , 9 $ ) 10875 . 1 ( 635 , 11 $ ) 10875 . 1 ( 500 , 12 $ ) 10875 . 1 ( 675 , 9 $ ) 10875 . 1 ( 500 , 8 $ ) 10875 . 1 ( 450 , 10 $ PV 5 4 3 2 6.5. Present Value with Multiple Cash Flows: Jeremy Fenloch borrowed from his friend a certain amount and promised to repay him the amounts of $1,225, $1,350, $1,500, $1,600, and $1,600 over the next five years. If the friend normally discounts investments
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This note was uploaded on 10/14/2008 for the course FIN 300 taught by Professor Olander during the Fall '08 term at ASU.

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KP_Ch6HWSolns - Chapter 6 VIII. Basic 6.1. Future Value...

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