Prac_Quiz_Chap_5

Prac_Quiz_Chap_5 - Homework Manager FIN 301 Section 1

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Question 1: Score 1/1 Your response Correct response Present Value and Multiple Cash Flows Ancelet Co. has identified an investment project with the following cash flows. If the discount rate is 12 percent, the present value of these cash flows is $ 3012.79 (33%). If the discount rate is 18 percent, the present value of these cash flows is $ 2664.15 (33%). If the discount rate is 30 percent, the present value of these cash flows is $ 2146.89 (33%). (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Year Cash Flow 1 $ 1,400 2 400 3 600 4 1,600 Present Value and Multiple Cash Flows Ancelet Co. has identified an investment project with the following cash flows. If the discount rate is 12 percent, the present value of these cash flows is $ 3012.79 . If the discount rate is 18 percent, the present value of these cash flows is $ 2664.15 . If the discount rate is 30 percent, the present value of these cash flows is $ 2146.89 . (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Year Cash Flow 1 $ 1,400 2 4 0 0 3 6 0 0 4 1,600 Feedback: To solve this problem, we must find the PV of each cash flow and add them. To find the PV of a lump sum, we use: PV = FV / (1 + r) t [email protected]% = $1,400 / 1.12 + $400 / 1.12 2 + $600 / 1.12 3 + $1,600 / 1.12 4 = $3,012.77 [email protected]% = $1,400 / 1.18 + $400 / 1.18 2 + $600 / 1.18 3 + $1,600 / 1.18 4 = $2,664.16 [email protected]% = $1,400 / 1.3 + $400 / 1.3 2 + $600 / 1.3 3 + $1,600 / 1.3 4 = $2,146.91 Question 2: Score 1/1 Your response Correct response Present Value and Multiple Cash Flows Investment X offers to pay you $3,000 per year for 14 years, whereas Investment Y offers to pay you $5,000 per year for 7 years. If the discount rate is 7 percent, Investment X has a present value of $ 26237.14 (25%), and Investment Y has a present value of $ 26950 (25%). If the discount rate is 21 percent, Investment X has a present value of $ 13295.71 (25%), and Investment Y has a present value of $ 17540.48 (25%). (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Present Value and Multiple Cash Flows Investment X offers to pay you $3,000 per year for 14 years, whereas Investment Y offers to pay you $5,000 per year for 7 years. If the discount rate is 7 percent, Investment X has a present value of $ 26237.14 , and Investment Y has a present value of $ 26950 . If the discount rate is 21 percent, Investment X has a present value of $ 13295.71 , and Investment Y has a present value of $ 17540.48 . (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Feedback: To find the PVA, we use the equation: PVA = C ({1 – [1/(1 + r )] t } / r ) At a 7 percent interest rate: [email protected]%: PVA = $3,000{[1 – (1/1.07) 14 ] / 0.07} = $26,236.4 [email protected]%: PVA = $5,000{[1 – (1/1.07) 7 ] / 0.07} = $26,946.45 And at a 21 percent interest rate: [email protected]%: PVA = $3,000{[1 – (1/1.21) 14 ] / 0.21} = $13,295.1 [email protected]%: PVA = $5,000{[1 – (1/1.21) 7 ] / 0.21} = $17,539.73 Question 3: Score 1/1 Your response Correct response omework Manager - FIN 301 - Section 1 http://mh3.brownstone.net/modules/viewRecord.TestDetails of 13 10/14/2009 11:57 PM
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Future Value and Multiple Cash Flows Rally, Inc., has identified an investment project with the following cash flows. If the discount rate is 21 percent, the future value of these cash flows in Year 4 is $ 4558.03 (100%). (Round your answer to 2 decimal places.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/10/2010 for the course FIN 301 taught by Professor Andelin,stevenle during the Spring '07 term at Penn State.

Page1 / 13

Prac_Quiz_Chap_5 - Homework Manager FIN 301 Section 1

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online