Calculating present and future values
Not what you're looking for?
Q12 What is the economic value today of each of the following payment streams if money can earn 7.5%.
a. $1000, $3000, and $2000 due in one, three, and five months, respectively.
b. Two $3000 payments due two and four months from now.
Q14 Ninety days ago Stella signed an agreement with Manon requiring her to make three payments of $400 plus interest 90, 150, and 210 days, respectively, from the date of the agreement. Each payment was to include interest on the $400 principal at the rate of 13.5% from the date of the agreement. Stella now wants Manon to renegotiate the agreement and accept a single payment 30 days from now, instead of the three scheduled payments. What payment should Manon require in the new agreement if money is worth 8.5%?
Purchase this Solution
Solution Summary
There are two problems. Solutions to these problems depicts the methodology to calculate present and future values of given cash streams.
Solution Preview
Q12 What is the economic value today of each of the following payment streams if money can earn 7.5%.
a. $1000, $3000, and $2000 due in one, three, and five months, respectively.
Present value of $1000 due in month i.e. P1
P1=1000/(1+(0.075*1)/12)=$993.79
Present value of $3000 due in 3 months i.e. P2
P2=3000/(1+(0.075*3)/12)=$ 2944.79
Present value of $2000 due in 5 months i.e. P3
P3=2000/(1+(0.075*5)/12)=$ 1939.39
Present Value of multiple cash inflows=993.79+2944.79+1939.39=$5877.97
b. Two $3000 payments due two ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
- "Thank you"
- "Really great step by step solution"
- "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
- "Thanks Again! This is totally a great service!"
- "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.