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Calculate the present value of $100,000 in the given cases

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Using the present value function in MS Excel, verify that the present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Calculate the present value of $100,000 for each of the following items (parts a-f) using these facts:

a. Interest is compounded semiannually
b. Interest is compounded quarterly
c. A discount rate of 12% is used
d. A discount rate of 20% is used
e. The cash will be received in three years
f. The cash will be received in seven years

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Solution Preview

Please refer attached file for better clarity of functions in MS Excel.

Future Value=FV=100,000
Number of periods=NPER= 5
Interest Rate=RATE=16%
Periodic Payment=PMT=0
Type of payment=0
PV can be found by using PV function in MS Excel.
PV= $47,611 =-PV(D8,D7,D9,D6,D10)
Ignoring rounding off errors , we received the same value as given.

a. Interest is compounded semiannually
Future Value=FV=100,000
Number of periods=NPER=5*2=10
Interest ...

Solution Summary

This solution describes the steps to calculate the present values in the given cases, using Excel calculations.

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Solving Present Value and Future Value Problems

It's important to understand the fundamentals of finance. This entails understanding the time value of money. The value of a typical corporate bond is the present value of an annuity plus the present value of a lump sum. Thus, if you don't understand how to calculate the present value of a lump sum or the present value of an annuity, it's highly unlikely you'll be able to determine the value of a typical corporate bond. Thus, in this Case Assignment, you will work through a variety of time value of money problems.

Answer these problems and show your work:

Calculate the present value of the following lump sums:
$100,000 to be received five years from now with a 5% annual interest rate
$200,000 to be received 10 years from now with a 10% annual interest rate
Calculate the future value of the following lump sums:
$100,000 if invested for five years at a 5% annual interest rate
$200,000 if invested for 10 years at a 10% annual interest rate
Calculate the present value of these ordinary annuities:
$100,000 to be received each year for five years with a 5% annual interest rate
$200,000 to be received each year for 10 years with a 10% annual interest rate
Calculate the future value of these ordinary annuities:
$100,000 if invested each year for five years at a 5% annual interest rate
$200,000 if invested each year for 10 years at a 10% annual interest rate
Calculate the present value of these perpetuities:
$100,000 to be received each year forever with a 5% annual interest rate
$200,000 to be received each year forever with a 10% annual interest rate
Submit your assignment by creating a table in Word. Interpret the results in Word. Your complete assignment should be 3-4 pages.

Assignment Expectations
You are expected to:

Describe the purpose of the report and provide a conclusion. An introduction and a conclusion are important because many busy individuals in the business environment may only read the first and the last paragraph. If those paragraphs are not interesting, they never read the body of the paper.
Answer the Case Assignment question(s) clearly and provide necessary details.
Write clearly and correctly—that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
Provide citations to support your argument and references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references.
Type and double-space the paper.
Whenever appropriate, please use Excel to show supporting computations in an appendix, present financial information in tables, and use the data computed to answer follow-up questions. In finance, in addition to being able to write well, it's important to present information in a professional manner and to analyze financial information. This is part of the assignment expectations and will be considered for grading purposes.

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