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FIN 300 Chapter Notes - Chapter 6: Canadian Whisky, Bonded Warehouse, Palm Treo

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greensheep522
3 Nov 2016
School
Ryerson University
Department
Finance
Course
FIN 300
Professor
Laleh Samarbakhsh

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Document Summary

Fin300 chapter 6: discounted cash flow valuation (textbook notes) Future value with multiple cash flow: suppose you deposit today in an account paying 8 percent. In one year, you will deposit another . At the end of the first year, you will have plus the second you deposit, for a total of . You leave this on deposit at 8 percent for another year. At the end of this second year, it is worth: Present value with multiple cash flows: suppose you need ,000 in one year and ,000 more in two years. The present value of ,000 in two years at 9 percent is: The present value of ,000 in one year is: To see why ,600. 79 is the right answer, we can check to see that after the ,000 is paid out in two years, there is no money left. If we invest ,600. 79 for one year at 9 percent, we will have:

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Related Questions

4) Your employer has agreed to place year-end deposits of $1,000, $2,000 and $3,000 into your retirement account. The $1,000 deposit will be one year from today, the $2,000 deposit two years from today, and the $3,000 deposit three years from today. If your account earns 5% per year, how much money will you have in the account at the end of year three when the last deposit is made?

Your daughter is currently 6 years old. You anticipate that she will be going to college in 12 years. You would like to have $137,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 12% per​ year, how much money do you need to put into the account today to ensure that you will have $137,000 in 12 ​years?

Your deposit today should be

​$.

​ (Round to the nearest​ dollar.)

Suppose you receive $180 at the end of each year for the next three years.

a. If the interest rate is 7%​, what is the present value of these cash​ flows?

b. What is the future value in three years of the present value you computed in (a​)?

c. Suppose you deposit the cash flows in a bank account that pays 7% interest per year. What is the balance in the account at the end of each of the next three years​ (after your deposit is​ made)? How does the final bank balance compare with your answer in ​(b​)?

a. If the interest rate is 7%​, what is the present value of these cash​ flows?

The present value of these cash flows is

​$ .

​ (Round to the nearest​ cent.)

You have just received a windfall from an investment you made in a​ friend's business. He will be paying you $31,004 at the end of this​ year, $62,008 at the end of the following​ year, and $93,012 at the end of the year after that​ (three years from​ today). The interest rate is 13.3% per year.

a. What is the present value of your​ windfall?

b. What is the future value of your windfall in three years​ (on the date of the last​ payment)?

a. What is the present value of your​ windfall?

The present value of your windfall is

​$.

​ (Round to the nearest​ dollar.)

4. What is the present value of the following annuity?
$1,022 every half year at the end of the period for the next 8 years, discounted back to the present at 19.17 percent, compounded semiannually.
Round the answer to two decimal places.

5. You have decided to place $567 in equal deposits every month at the beginning of the month into a savings account earning 14.68 percent per year, compounded monthly for the next 11 years. The first deposit is made today. How much money will be in the account at the end of that time period?
Round the answer to two decimal places.

6. What is the present value of the following annuity?
$3,216 every half year at the beginning of the period for the next 6 years, discounted back to the present at 3.84 perecent per year, compounded semiannually.
Round the answer to two decimal places.