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Chapter 4 homework

Chapter 4 homework - Michael Ientile Financial Management...

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Michael Ientile Financial Management Chapter 4 Problems P4-1 Using a time line: Compou nd Future Value (25,000) 3,000 6,000 6,000 1,000 8,000 7,000 0 1 2 3 4 5 6 Present Value Discount d. Financial managers make decisions at time zero (present time), thus they rely primarily on present value techniques. 4-3 Future Value Tables: Case Interest Rate a. Double b. Quadruple A 7% 10<n<11 20<n<21 B 40% 2<n<3 4<n<5 Case 20% 3<n<4 7<n<8 D 10% 7<n<8 14<n<15

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Michael Ientile Financial Management Chapter 4 Problems 4-4 Future Values: Case Single Cash Flow Interest Rate Deposit Period (years) Future Value (Compound Forward) A \$200.00 5% 20 \$530.66 B \$4,500.00 8% 7 \$7,712.21 Case \$10,000.0 0 9% 10 \$23,673.64 D \$25,000.0 0 10% 12 \$78,460.71 E \$37,000.0 0 11% 5 \$62,347.15 F \$40,000.0 0 12% 9 \$110,923.15 FVn= Future Value at end of period n PV= Present Value i= annual rate of interest n= number of periods that the money is left as a deposit FVn=PV * (1+i)^n 4-6 Time Value Purchase a new car 5 years from today (Compound Forward) Car cost \$14,000 today; price will increase by 2% to 4% per year over the next 5 years a. Estimate the price of the car at the end of 5 years if inflation is
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Chapter 4 homework - Michael Ientile Financial Management...

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