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    What is the present value of the following future amounts

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    5-4B. (Present value) What is the present value of the following future amounts?
    a. $800 to be received 10 years from now discounted back to the present at 10 percent
    b. $400 to be received 6 years from now discounted back to the present at 6 percent
    c. $1,000 to be received 8 years from now discounted back to the present at 5 percent
    d. $900 to be received 9 years from now discounted back to the present at 20 percent

    5-9B. (Compound interest with nonannual periods)
    a. Calculate the future sum of $6,000, given that it will be held in the bank five years at an
    annual interest rate of 6 percent.
    b. Recalculate part (a) using a compounding period that is (1) semiannual and
    (2) bimonthly.
    c. Recalculate parts (a) and (b) for a 12 percent annual interest rate.
    d. Recalculate part (a) using a time horizon of 12 years (annual interest rate is still 6 percent).
    e. With respect to the effect of changes in the stated interest rate and holding periods on
    future sums in parts (c) and (d), what conclusions do you draw when you compare these
    figures with the answers found in parts (a) and (b)?

    15-1B. (Break-even point) Roberto Martinez is the chief financial analyst at New Wave
    Pharmaceuticals (NWP), a company that produces a vitamin claimed to prevent the common
    cold. Roberto has been asked to determine the company's break-even point in units. He obtained
    the following information from the company's financial statements for the year just ended. In
    addition, he found out from NWP's production manager that the company produced 40 million
    units in that year. What will Roberto determine the break-even point to be?
    Sales $20,000,000
    Variable costs __1_6_,0_0_0_,_0_0_0
    Revenue before fixed costs $ 4,000,000
    Fixed costs ___2_,4_0_0_,_0_0_0
    EBIT __$____1__,6__0__0__,__0__0__0

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    Solution Preview

    5-4B. (Present value) What is the present value of the following future amounts?

    a. $800 to be received 10 years from now discounted back to the present at 10 percent

    PV = FV/(1 + r)n where PV is the present value
    FV is the future value
    r is the discount rate
    n is the period
    PV = 308.43

    b. $400 to be received 6 years from now discounted back to the present at 6 percent

    PV = 281.98
    c. $1,000 to be received 8 years from now discounted back to the present at 5 percent

    PV = 676.84
    d. $900 to be received 9 years from now discounted back to the present at 20 percent

    PV = 174.43

    5-9B. (Compound interest with nonannual periods)
    a. Calculate the future ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the present value of the following future amounts.

    $2.19