-11 Present values For each of the cases shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. Single cash flow 28,000 10,000 Discount rate 3 12=8 End of period (years) 4 20
-11 Present values For each of the cases shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. Single cash flow 28,000 10,000 Discount rate 3 12=8 End of period (years) 4 20
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![### Present Values Calculation
In this section, we'll examine how to calculate the present value of cash flows using a discount rate and the assumption that the cash flow is received at the end of the specified period. The table below illustrates the different cases, each with a specified single cash flow, discount rate, and time frame.
#### Table: Present Value Calculation
| Case | Single Cash Flow | Discount Rate | End of Period (years) |
|------|------------------|---------------|-----------------------|
| A | $7,000 | 12% | 4 |
| B | $28,000 | 8% | 20 |
| C | $10,000 | 14% | 12 |
| D | $150,000 | 11% | 6 |
| E | $45,000 | 20% | 8 |
For each case, you'll need to apply the present value formula:
\[ \text{PV} = \frac{\text{CF}}{(1 + r)^n} \]
Where:
- **PV** = Present Value
- **CF** = Cash Flow
- **r** = Discount Rate
- **n** = Number of Years (End of Period)
Using this formula, you can determine how much a future cash flow is worth in today's terms, accounting for the time value of money via the specified discount rates.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe113312d-de6f-4b67-8298-7ca1981f542c%2F2cfe88f8-e677-4b20-902e-be5e0689ba88%2F5ai7jh7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Present Values Calculation
In this section, we'll examine how to calculate the present value of cash flows using a discount rate and the assumption that the cash flow is received at the end of the specified period. The table below illustrates the different cases, each with a specified single cash flow, discount rate, and time frame.
#### Table: Present Value Calculation
| Case | Single Cash Flow | Discount Rate | End of Period (years) |
|------|------------------|---------------|-----------------------|
| A | $7,000 | 12% | 4 |
| B | $28,000 | 8% | 20 |
| C | $10,000 | 14% | 12 |
| D | $150,000 | 11% | 6 |
| E | $45,000 | 20% | 8 |
For each case, you'll need to apply the present value formula:
\[ \text{PV} = \frac{\text{CF}}{(1 + r)^n} \]
Where:
- **PV** = Present Value
- **CF** = Cash Flow
- **r** = Discount Rate
- **n** = Number of Years (End of Period)
Using this formula, you can determine how much a future cash flow is worth in today's terms, accounting for the time value of money via the specified discount rates.
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