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What is the total present value of 80 received in one year 300 received in two years and 700 received in six years if the discount rate is 7?
- First find the PV of the sum of $80 that is received in year 1. Using interest factor (1yr @7%) tables found in most finance text books that will be $74.80 ($80*0.935)
- Next you need to find the PV of annuity for two years of $300 @7%. Using interest factors this will be $542.20 ($300*1.808). But this is the PV at year 1 since the payments started in Year 2. Now you need to convert this PV to year 0 by using the interest factor for a sum for one year and multiplying $542.20 by this factor (0.935). This will give a result of $507.14
- Finally you need to find the PV of annuity for six years of $700 @7%. Using the interest factors this will be $3336.90 ($700*4.767). But this is the PV at year 3, so you will need to convert this to PV @ year 0 buy multiplying this # by the interest factor for the PV of a sum for 3 yrs @7% (0.816) to get $2722.91
- Now you add the three results together to get the present value @ year 0: $74.80 + $507.14 + $2722.91 to get the answer of $3304.85
What else can I help you with?
What is the Present value of 700 to be received in two installments of 350 two years from today at a discount rate of 10 percent?
i think the present of 700 is 700%
What are the four pieces to an annuity present value?
The four pieces to an annuity present value are: Present value(PV), Cashflow (C), Discount rate (r) and the life of the annuity (t)
What variables are required to calculate the present value of a future amount?
The future amount itself and a discount rate.
What is the difference between discount factor and discount rate?
Discount factor is the factor determining future cash flow, but multiplying the cash flow to obtain present value. Discount rate is used in calculations to equal the cost of capital.
Which one of the following discount frequencies will yield the largest present value give a stated future value and annual percentage rate.?
daily
What is the present value of 500 to be received 10 yrs from today if it is discount at the rate of 6 percent?
What is the present value of 500 to be recieved 10 yrs from today if it is discount at the rate of 6 percent?
What is the Present value of 700 to be received in two installments of 350 two years from today at a discount rate of 10 percent?
i think the present of 700 is 700%
What is normally used as the discount rate in the net present value method?
the net present value as determined by normal discount rate is 10%
To increase a given present value the discount rate should be adjusted?
To increase a given present value, you would generally lower the discount rate. This is because a lower discount rate reduces the impact of future cash flows, making the present value higher. Conversely, increasing the discount rate would decrease the present value.
As the discount rate becomes higher and higher the present value of inflows approaches what?
As, the present value of future cash flows is determined by the discount rate, so increase or decrease in the discount rate will affect the present value. Discount rate is simply cost or the expense to the company,so in simplest terms, discount rate goes up, cost goes up,so this will lower the present value of cash flows. Assumes a discount rate of 5%,to discount $100 in one years time: Present Value=$100 * 1/(1.05) =$95.24 Ok,as you say,if the discount rate becomes higher,let's say 8%: Present Value=$100 * 1/(1.08) =$92.6 so, the higher the discount rate, the lower the present value.
1000 is expected to be received 10 years from now The present value of this 1000 future cash flow is what?
It depends on what discount rate you're using.
What is the present value of 12500 to be received 10 years from today Assume a discount rate of 8 percent compounded annually and round to the nearest 10?
$5,790
Is the interest rate and discount rate in present value?
yes they are the same
Any premium or discount on a long-term debt investment is amortized?
Yes, at the end of the year you take the difference between the interest revenue gained and what would have been gained if the investment had the present value interest. For a discount, the difference will be credited against the discount received.
What are the four pieces to an annuity present value?
The four pieces to an annuity present value are: Present value(PV), Cashflow (C), Discount rate (r) and the life of the annuity (t)
What happens to the present value if you increase the rate?
If you increase the rate, the present value will decrease. This is because a higher discount rate means that future cash flows are worth less in present value terms.
Why a high discount rate gives a low present value of a cash flow?
The higher the discount rate, the more time value of money we are tacking out of original amount from the future value
