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Time Value of Money in Investments

Problem #1
Smolinski company is considering an investment which will return a lump sum of $5000,000 five years from now. What amount should simolinski company pay for this investment to earn a 15% return.

Problem #2
Kilarny company is considering investing in an annuity cintract that will return $20,000.00 annually at the end of each year for 15 years. What amount should Kilarny company pay for this investment if it earns a 6% return

Solution Preview

Problem #1
Smolinski company is considering an investment which will return a lump sum of $5000,000 five years from now. What amount should simolinski company pay for this investment to earn a 15% return.

We are given the future value and we have to find the present value. The ...

Solution Summary

The solution calculates how much the Smolinski company has to pay for the investment to earn 15% by using the present value formula and also what amount should the Kilarny company pay for a 6% return using the PVIFA table. All steps are shown with brief explanations.

$2.19