Chapter 13 Homework Solutions

Chapter 13 Homework Solutions - Exercise137 1. a.

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Exercise 13-7 1. a. $400,000 × 0.794 (Exhibit 13-22) = $317,600. b. $400,000 × 0.712 (Exhibit 13-22) = $284,800. 2. a. $5,000 × 4.355 (Exhibit 13-23) = $21,775. b. $5,000 × 3.685 (Exhibit 13-23) = $18,425. 3. Looking in Exhibit 13-23 Appendix 13A, the factor for 10% for 20 years is  8.514. Thus, the present value of Sally’s winnings would be: $50,000 × 8.514 = $425,700. Whether or not Sally really won a million dollars depends on your point  of view. She will receive a million dollars over the next 20 years ($50,000  × 20 years); however, in terms of its value  right now  she won much less  than a million dollars as shown by the present value computation above.
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Exercise 13-14   1. Amount of Cash  Flows 20% Present Value of  Cash Flows Year(s) X Y Factor X Y 1 $1,000 $4,000 0.833 $  833 $3,332 2 $2,000 $3,000 0.694 1,388 2,082 3 $3,000 $2,000 0.579 1,737 1,158 4 $4,000
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Chapter 13 Homework Solutions - Exercise137 1. a.

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