FIN3300 Solution Ch5 (W 0623)

# FIN3300 Solution Ch5 (W 0623) - Solution CHAPTER 5...

This preview shows pages 1–2. Sign up to view the full content.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Solution CHAPTER 5 INTRODUCTION TO VALUATION: THE TIME VALUE OF MONEY Page 142 Questions: 8, 9, 10, 11, 12, 13, 14, 15 8. To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is: FV = PV(1 + r ) t Solving for r , we get: r = (FV / PV) 1 / t – 1 r = (\$314,600 / \$200,300) 1/7 – 1 = .0666 or 6.66% 9. To answer this question, we can use either the FV or the PV formula. Both will give the same answer since they are the inverse of each other. We will use the FV formula, that is: FV = PV(1 + r ) t Solving for t , we get: t = ln(FV / PV) / ln(1 + r ) t = ln (\$170,000 / \$40,000) / ln 1.053 = 28.02 years 10. To find the PV of a lump sum, we use: PV = FV / (1 + r) t PV = \$650,000,000 / (1.074) 20 = \$155,893,400.13 11. To find the PV of a lump sum, we use: PV = FV / (1 + r) t PV = \$1,000,000 / (1.10) 80 = \$488.19 12. To find the FV of a lump sum, we use: FV = PV(1 + r ) t FV = \$50(1.045) 105 = \$5,083.71 1 13.13....
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

FIN3300 Solution Ch5 (W 0623) - Solution CHAPTER 5...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online