An investment makes annual payments. The first payment of $245 is due in one year at i = 1. The payments grow at a rate of 14.0% annually until 1 =14. Payments are then stable until f =32. Afterwards, payments grow at a rate of 2.0% annually (the payment at i =33 is 2.0% bigger that the payment at 1 =32) and are paid into perpetuity. a) What is the size of the cash flow at i =15? |(Give answer to 2 decimal places.) b) What is the size of the cash flow at t =33? |(Give answer to 2 decimal places.) c) What is the present value of the investment if the discount rate is 16.0%? | (Give answer to 2 decimal places.)

An investment makes annual payments. The first payment of $245 is due in one year at i = 1. The payments grow at a rate of 14.0% annually until 1 =14. Payments are then stable until f =32. Afterwards, payments grow at a rate of 2.0% annually (the payment at i =33 is 2.0% bigger that the payment at 1 =32) and are paid into perpetuity. a) What is the size of the cash flow at i =15? |(Give answer to 2 decimal places.) b) What is the size of the cash flow at t =33? |(Give answer to 2 decimal places.) c) What is the present value of the investment if the discount rate is 16.0%? | (Give answer to 2 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 16P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

An investment makes annual payments. The first payment of $245 is due in one year at i = 1. The payments grow at a rate of
14.0% annually until t =14. Payments are then stable until t =32. Afterwards, payments grow at a rate of 2.0% annually (the
payment at i =33 is 2.0% bigger that the payment at 1 =32) and are paid into perpetuity.
a) What is the size of the cash flow at / =15?
2$
|(Give answer to 2 decimal places.)
b) What is the size of the cash flow at t =33?
|(Give answer to 2 decimal places.)
c) What is the present value of the investment if the discount rate is 16.0%?
| (Give answer to 2 decimal places.)

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