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4. What is the present worth of a project that has an initial investment of $50,000 and generates annual cash inflows of $10,000 for 10 years, with a discount rate of 8%? a) $429,907 b) $46,881 c) $55,398 d) $82,500

4. What is the present worth of a project that has an initial investment of $50,000 and generates annual cash inflows of $10,000 for 10 years, with a discount rate of 8%? a) $429,907 b) $46,881 c) $55,398 d) $82,500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Choose the correct answers for the following questions: 1. What is the annual equivalent interest rate of a cash flow of $500 received now, with a present worth of $386.47 at an interest rate of 10% per year? a) 5% b) 10% c) 7.6931% d) 15% 2. You expect to deposit the following cash flows at the end of years 1 through 5, ($1,000; $4,000; $9,000; $5,000; and $2,000) respectively. Alternatively, you could deposit a single amount today at the beginning of year 1 (end of year 0). How large does the single deposit need to be today if you can earn 10% compounded annually? Hint: the present value today (t-0) is identical to the single cash flow amount. a) $15,633.62 b) $21,000.00 c) $25,178.10 d) $27,695.91 3. What is the annual equivalent rate of an investment that pays 5% semi-annually? a) 5.25% b) 5.00% c) 4.75% d) 5.50% 4. What is the present worth of a project that has an initial investment of $50,000 and generates annual cash inflows of $10,000 for 10 years, with a discount rate of 8%? b) $46,881 a) $429,907 c) $55,398 d) $82,500 5. An engineer borrowed P 10,000 at 12% interest and paid P 2,000 per annum for the last 4 years. What does he have to pay at the end of the fifth year in order to pay off his loan? a) P 6,999.39 b) P 6,292.93 c) P 6,222.39 d) P 6,922.93
Transcribed Image Text:Choose the correct answers for the following questions: 1. What is the annual equivalent interest rate of a cash flow of $500 received now, with a present worth of $386.47 at an interest rate of 10% per year? a) 5% b) 10% c) 7.6931% d) 15% 2. You expect to deposit the following cash flows at the end of years 1 through 5, ($1,000; $4,000; $9,000; $5,000; and $2,000) respectively. Alternatively, you could deposit a single amount today at the beginning of year 1 (end of year 0). How large does the single deposit need to be today if you can earn 10% compounded annually? Hint: the present value today (t-0) is identical to the single cash flow amount. a) $15,633.62 b) $21,000.00 c) $25,178.10 d) $27,695.91 3. What is the annual equivalent rate of an investment that pays 5% semi-annually? a) 5.25% b) 5.00% c) 4.75% d) 5.50% 4. What is the present worth of a project that has an initial investment of $50,000 and generates annual cash inflows of $10,000 for 10 years, with a discount rate of 8%? b) $46,881 a) $429,907 c) $55,398 d) $82,500 5. An engineer borrowed P 10,000 at 12% interest and paid P 2,000 per annum for the last 4 years. What does he have to pay at the end of the fifth year in order to pay off his loan? a) P 6,999.39 b) P 6,292.93 c) P 6,222.39 d) P 6,922.93
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