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
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.
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
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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
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 Spring '10
 Dr.Reynolds
 Future Value, financial management Chapter, Michael Ientile Financial, Ientile Financial Management, Michael Ientile

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