Explore BrainMass

Explore BrainMass

    Find the present value

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I need to verify the following short financial problems. Please, see an attachment. Thank you.

    Financial Planning & Controls Review Worksheet

    1. Find the present value of the following:

    A. $1,200 in 5 years @ 5%
    B. $3,000 in 10 years @ 9%

    2. Find the future value of the following:

    A. $1,500 in 6 years @ 6%
    B. $1,500 in 6 years @ 6% [compounded semi-annually]

    3. Find the present value [current price] of a bond with the following:

    $1000 par value
    7% coupon rate
    10% current market yield
    20 years till maturity

    4. Wizard Company produces a game selling for $32. Last year Wizard sold 50,000 games, each of which costs $6 to produce. Wizard incurred selling and administrative expenses of $80,000 and depreciation expense of $10,000. In addition, Wizard has a $100,000 loan outstanding at 12%. Their tax rate is 40%. There are 100,000 common shares outstanding.

    Prepare an income statement for Wizard in good form [include EPS].

    5. Calculate the after-tax cost of the interest. Assume the company has issued 10,000 bonds with a coupon rate of 8% and a face value of $1,000 per bond. The company has a marginal tax rate of 35%.

    © BrainMass Inc. brainmass.com June 3, 2020, 10:09 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/find-the-present-value-217708

    Attachments

    Solution Preview

    Financial Planning & Controls Review Worksheet

    1. Find the present value of the following:

    A. $1,200 in 5 years @ 5%

    PV = FV/(1 + i)n where PV is the present value
    FV is the future value
    i is the discount rate
    n is the period

    PV = 1,200 = 940.23
    (1.05)5

    B. $3,000 in 10 years @ 9%

    PV = 3,000 = 1,267.23
    (1.09)10

    2. Find the future value of the following:

    A. $1,500 in 6 years @ 6%

    FV = PV(1 + i)n where PV is the present value
    FV is the future value
    i is the discount rate
    n is the period

    FV = 1,500(1.06)6 = 2,127.78

    B. $1,500 in 6 years @ 6% [compounded ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer the present value, future value, prepare an income statement for Wizard in good form [include EPS], and calculate the after-tax cost of the interest.

    $2.19

    ADVERTISEMENT