Share
Explore BrainMass

Net Price Value

1. What is the present value of $25,000 that you will receive at the end of two years with a discount rate of 5.6%?

PV=C_2/(1+r_2 )^2 =25,000/(1+(0.056)^2 )=$22,000.14

So I think that I've got the right answer to this one, which should be 22,000.14? If I'm incorrect please guide me to the correct answer.

2. What is the present value of $2,000 that you will receive at the end of 3 years with a discount rate of 5.6%?

PV=C_3/(1+r_3 )^3 =2,000/(1+〖0.056〗^3 )^3 =2,000/(1.000)^3 =2,000

Same for this one? I'm assuming that the answer to this question is $2,000; if I am incorrect please guide me to the correct answer.

4. (USE End of year sum fact) cash flow scenario: annual payments of $50,000 paid at the beginning of each of the next five years (total of $250,000). What is the NP of all lease payments with a discount rate of 5.6%?

5. What is the net present value of a lease that requires you to pay $10,000 at the beginning of each year for the next five years and includes a provision for a rebate of $5,000 at the end of year 5?

Completely stumped on this one.

6. What is the net present value of an item that has a purchase price of $20,000 requires a $1,000 maintenance at the end of each year expect year 4, and is expected to have a salvage value of $1,000 at the end of the 5 year useful life?

Solution Preview

1. What is the present value of $25,000 that you will receive at the end of two years with a discount rate of 5.6%?

Answer

Present value = 25000/(1 + 0.056)^2 = $22418.79

2. What is the present value of $2,000 that you will receive at the end of 3 years with a discount rate of 5.6%?

Answer

Present value = 2000/(1 + 0.056)^3 = $1698.39

4. (USE End of year sum fact) cash ...

Solution Summary

The net price values are discussed.

$2.19