Using a present value table CTable 6-4 and Table 6-5), calculate the present val
ID: 2521155 • Letter: U
Question
Using a present value table CTable 6-4 and Table 6-5), calculate the present value for the following: (Use appropriate factos Required: a, A car down payment of$50,000 that will be required in seven years, assuming an interest rate of 10%. b, A lottery prze of S6 million to be paid at the rate of$300,000 per year for 20 years, assuming an interest rate of6%. S 3,440,976 C. The same annual amount as n part b, but assuming an interest rate of 8%. S 2,945444 d. A capital lease oblgation that calls tr the payment of s8,000 per year for 10 years, assuming a discount rate 3 4 5 WEExplanation / Answer
Answer =1 CALCULATION OF THE PRESENT VALUE of $ 1 in 10 Yeat @10 Years PVF @ 10% 0 1.0000 1 0.9091 2 0.8264 3 0.7513 4 0.6830 5 0.6209 6 0.5645 7 0.5132 Present Value of the $ 50,000 in seven years = $ 50,000 X 0.5132 = $ 25,657.91 Answer =2 CALCULATION OF THE PRESENT VALUE WITH INTEREST RATE OF 6% YEARS Per year Cashh flow PVF @ 6% PREsent Value 1 $ 3,00,000 0.9434 $ 2,83,019 2 $ 3,00,000 0.8900 $ 2,66,999 3 $ 3,00,000 0.8396 $ 2,51,886 4 $ 3,00,000 0.7921 $ 2,37,628 5 $ 3,00,000 0.7473 $ 2,24,177 6 $ 3,00,000 0.7050 $ 2,11,488 7 $ 3,00,000 0.6651 $ 1,99,517 8 $ 3,00,000 0.6274 $ 1,88,224 9 $ 3,00,000 0.5919 $ 1,77,570 10 $ 3,00,000 0.5584 $ 1,67,518 11 $ 3,00,000 0.5268 $ 1,58,036 12 $ 3,00,000 0.4970 $ 1,49,091 13 $ 3,00,000 0.4688 $ 1,40,652 14 $ 3,00,000 0.4423 $ 1,32,690 15 $ 3,00,000 0.4173 $ 1,25,180 16 $ 3,00,000 0.3936 $ 1,18,094 17 $ 3,00,000 0.3714 $ 1,11,409 18 $ 3,00,000 0.3503 $ 1,05,103 19 $ 3,00,000 0.3305 $ 99,154 20 $ 3,00,000 0.3118 $ 93,541 Total $ 34,40,976 Answer =3 CALCULATION OF THE PRESENT VALUE WITH INTEREST RATE OF 8% YEARS Per year Cashh flow PVF @ 8% PREsent Value 1 $ 3,00,000 0.9259 $ 2,77,778 2 $ 3,00,000 0.8573 $ 2,57,202 3 $ 3,00,000 0.7938 $ 2,38,150 4 $ 3,00,000 0.7350 $ 2,20,509 5 $ 3,00,000 0.6806 $ 2,04,175 6 $ 3,00,000 0.6302 $ 1,89,051 7 $ 3,00,000 0.5835 $ 1,75,047 8 $ 3,00,000 0.5403 $ 1,62,081 9 $ 3,00,000 0.5002 $ 1,50,075 10 $ 3,00,000 0.4632 $ 1,38,958 11 $ 3,00,000 0.4289 $ 1,28,665 12 $ 3,00,000 0.3971 $ 1,19,134 13 $ 3,00,000 0.3677 $ 1,10,309 14 $ 3,00,000 0.3405 $ 1,02,138 15 $ 3,00,000 0.3152 $ 94,573 16 $ 3,00,000 0.2919 $ 87,567 17 $ 3,00,000 0.2703 $ 81,081 18 $ 3,00,000 0.2502 $ 75,075 19 $ 3,00,000 0.2317 $ 69,514 20 $ 3,00,000 0.2145 $ 64,364 Total $ 29,45,444 Answer =4 CALCULATION OF THE PRESENT VALUE WITH DISCOUNT RATE OF 6% YEARS Per year Cashh flow PVF @ 6% PREsent Value 1 $ 8,000 0.9434 $ 7,547 2 $ 8,000 0.8900 $ 7,120 3 $ 8,000 0.8396 $ 6,717 4 $ 8,000 0.7921 $ 6,337 5 $ 8,000 0.7473 $ 5,978 6 $ 8,000 0.7050 $ 5,640 7 $ 8,000 0.6651 $ 5,320 8 $ 8,000 0.6274 $ 5,019 9 $ 8,000 0.5919 $ 4,735 10 $ 8,000 0.5584 $ 4,467 `TOTAL - PRESENT VALUE = $ 58,881
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