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Valuation of assets Using the information provided in the following table, find

ID: 2637959 • Letter: V

Question

Valuation of assets Using the information provided in the following table, find the

value of each asset.

Cash flow

Asset          End of year                   Amount               Appropriate required return

A                          1                           $ 5,000                                   18%

2                              5,000

3                              5,000

B                1 through infinity`       $    300                                   15%

C                1                                    $       0                                    16%

2                                              0

3                                              0

4                                              0

5                                    35,000

D                1 through 5                   $ 1,500                                   12%

6                              8,500

E                          1                           $ 2,000                                   14%

2                              3,000

3                              5,000

4                              7,000

5                              4,000

6                              1,000


Please show how to calculate.

Explanation / Answer

Asset A

Value = 5,000 * PVAF(18%,3 YEARS) = $10,871.36

Asset B

VAlue = 300 / 15% = $2,000

Asset C

Value = 35,000 * PVF(16%,5 YEARS) = $16,663.96

Asset D

Value = 1,500 * PVAF(12%,5 YEARS) + 8,500 * PVF(12%,6 YEAR) = $9,713.53

Asset E

YEAR          CASH FLOW          DF@14%             PRESENT VALUE

1                  2,000                      0.877                     1,754

2                  3,000                      0.769                     2,307

3                  5,000                      0.675                     3,375

4                  7,000                      0.592                     4,144

5                  4,000                      0.519                     2,076

6                  1,000                      0.455                       455

                                                          TOTAL =        $14,111