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
Related questions
Question
Hello,
I can't figure out the answer to a question.
I have attached a screen shot of the question. I am able to calculate part A correctly as shown, but I can not get part B. The answer I got in part b about factory worth was $599,348.18.
I have followed the formulas shown exactly. On this problem I did =PV(0.09,4,-185000,0) in excel.
I have done this problem multiple times with different numbers and always get part A, but not part B. Getting part A correct tells me all my input numbers are correct, so what am I doing wrong for part B?
I have also attached screen shot of my excel sheet and you can see formula I entered in the bar above
Transcribed Image Text:Paste
BI U
60 .00
Conditional Format as
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Formatting Table v Styles v
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Ce
К17
=PV(0.09,4,-185000,0)
E
F
H
K
L.
M
N
P
PV Of Cash Flows
-$950,000.00
$169,724.7706
Year
Cash Flows
FVIF @ 11%
-$950,000.00
1.0000
3
1.
$185,000.00
1.0900
$155,710.7988
$142,853.9438
4
$185,000.00
1.1881
5
3
$185,000.00
1.2950
4
$185,000.00
1.4116
$131,058.6640
7
5
$185,000.00
1.5386
$120,237.3065
8
$185,000.00
1.6771
$110,309.4555
9
7
$185,000.00
1.8280
$101,201.3353
10
8
$185,000.00
1.9926
$92,845.2617
11
9
$185,000.00
2.1719
$85,179.1392
12
10
$185,000.00
2.3674
$78,145.9993
13
11
$185,000.00
2.5804
$71,693.5773
14
12
$185,000.00
2.8127
$65,773.9241
15
13
$185,000.00
3.0658
$60,343.0497
16
NPV Of Factory
$435,077.23
17
Worth End Of Four Years
$599,348.18
18
19
20
21
22
22
Problem 7 Amoritization Table
Problem 14 NPV
Problem 14 NPV Try 2
Problem 12 NPV MCF A ... +
...
Transcribed Image Text:Problem 2-14 Present values
A factory costs $950,000. You reckon that it will produce an inflow after operating costs of $185,000 a year for 13 years.
3.33
points
a. If the opportunity cost of capital is 9%, what is the net present value of the factory? (Do not round intermediate calculations. Round
your answer to 2 decimal places.)
O Answer is complete and correct.
Net present value
$ 435,077.23 O
b. What will the factory be worth at the end of four years? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
3.
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