1)What is the present worth of the following series of income & disbursements if
ID: 2508155 • Letter: 1
Question
1)What is the present worth of the following series of income & disbursements if the interest rate is 6% per year? YearIncomeExpense 0. 1-3 4-8 12,000-7000 900 600 A) 6863 B) 7066 C) 8047 D) 8383 2) Determine the amount of money that needs to be deposited 3 years from now to withdraw $6,000 per year for 6 years beginning 5 years from now if the interest rate is 8% per year. A) 22877 B) 23988 C) 24900 D) 25682 3)If a company wants to have $200,000 in a contingency fund 15 years from now, the amount the com year is pany must deposit each year in years 1-5 at an interest rate of 8% per A) 14,989 B) 15,789 C) 16,209 D) 17,156Explanation / Answer
Dear student, only one question is allowed at a time. I am answering the first question
Present Value Factor
= 1 / (1 + r) ^ n
Where,
r = Rate of interest = 6% or 0.06
n = Years 0 to 8
So, PV Factor for year 2 will be
= 1 / (1.06) ^ 2
= 1 / 1.1236
= 0.889996
The following table shows the calculations
So, as per above calculations, option A is the correct option
Calculations Particulars 0 1 2 3 4 5 6 7 8 A Income 12,000 800 800 800 900 900 900 900 900 B Expenses 7,000 500 500 500 600 600 600 600 600 C = A - B Net cash flows 5,000 300 300 300 300 300 300 300 300 D PV Factor 1.000000 0.943396 0.889996 0.839619 0.792094 0.747258 0.704961 0.665057 0.627412 E = C x D Present value 5,000.00 283.02 267.00 251.89 237.63 224.18 211.49 199.52 188.22 F = Sum E Net Present value 6,863Related Questions
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