1. ROFL Corporation expects to earn 379,000 at the end of the second year and pr

Question

1. ROFL Corporation expects to earn 379,000 at the end of the second year and projects a growth in earnings of 6.15 percent per year. If k is 7.95 percent, what is the present value of the earnings if the company will be liquidated after twenty years from now?

A) 5331135.24

B) 5332135.24

C) 5333134.24

D) 5334135.24

E) None of the above

2. QKL Co. plans a new project that will generate 187,000 of cash flow at the end of each year for 8 years and additionally 108,000 at the end of the project. If hte continuoysly compounded rate of interest is 4%, estimate the present value of the cash flows.

A) 1197567.12

B) 1271061.87

C) 1333242.98

D) 1358677.35

E) None of the above

Explanation / Answer

1 Cash Flows Discount Rate Present value 2 379000 0.858133 325232.5 3 402308.5 0.794936 319809.4 4 427050.5 0.736393 314476.8 5 453314.1 0.682161 309233.1 6 481192.9 0.631923 304076.8 7 510786.3 0.585385 299006.5 8 542199.6 0.542274 294020.8 9 575544.9 0.502338 289118.2 10 610940.9 0.465343 284297.3 11 648513.8 0.431073 279556.8 12 688397.4 0.399327 274895.4 13 730733.8 0.369918 270311.7 14 775673.9 0.342675 265804.4 15 823377.9 0.317439 261372.3 16 874015.6 0.294061 257014 17 927767.6 0.272405 252728.5 18 984825.3 0.252344 248514.4 19 1045392 0.23376 244370.6 20 1109684 0.216544 240295.8 5334135 $ 5334135.24 The correct answer is D) $ 5334135.24 2 Present Value = Cash Inflows- cash Outflows Cash Inflows = Cash Flows* PVAF, Rate Present Value = 187000(1/(1.04)+1/(1.04)2+1/(1.04)3+1/(1.04)4+1/(1.04)5+1/(1.04)6+1/(1.04)7+1/(1.04)8) Present Value = 187000* 6.7327 +108000*.730 Present Value = $ 1259023.29+78914.54 Present Value = $ 1333242.98 The Correct answer is C) $ 1333242.98

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.