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Unformatted text preview: Michael Ientile Financial Management Chapter 4 Problems P41 Using a time line: Compou nd Future Value (25,000) 3,000 6,000 6,000 1,000 8,000 7,000 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. 43 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 Michael Ientile Financial Management Chapter 4 Problems 44 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 46 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 Michael Ientile...
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This note was uploaded on 09/24/2010 for the course BU 506 taught by Professor Dr.reynolds during the Spring '10 term at Georgian.
 Spring '10
 Dr.Reynolds
 Future Value

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