25. What is the present value of $50,000 received 7 years from today if the disc

Question

25. What is the present value of $50,000 received 7 years from today if the discount rate is 10 percent? A. $25,000.00 B. $25,657.91 C. $28,223.70 D. $29,411.76 E. 31,000.00 26. What is the present value of the following end-of-year cash flows if the discount rate is 8 percent? Year Cash Flow $170 2 S230 3 $480 4 $890 A. $1,149.65 B. $1,389.81 C. $1,430.57 D. $1,687.83 E. $1,890.83 27. Approximately how long must one wait (to the nearest year) for an initial investment of $1,000 to triple in value if the investment earns 8% compounded annually? A. 9 years B. 14 years C. 22 years D. 25 ycars E. 28 years

Explanation / Answer

Answer to Question 25.

Option B is correct.

Future Value = Present Value * (1 + r)^n

$50,000 = Present Value * (1 + 0.10)^ 7

$50,000 = Present Value * 1.10 ^7

$50,000 = Present Value * 1.9487171

Present Value = $25,657.91

Answer to Question 26.

Option B is correct.

1,389.62

Answer to Question 27.

Option B is Correct.

Future Value = Present Value * (1 + r)^n

$3,000 = $1,000 * (1 + 0.08)^ n

$3,000 = $1,000 * 1.08 ^ n

3 = 1.08^n

N = 14 years

Year Cash Flow PV Factor PV of Cash Flow 1 170 0.9259 157.40 2 230 0.8573 197.18 3 480 0.7937 380.98 4 890 0.7349 654.06 PV of Cash Flow

1,389.62

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