Mr. Art Deco will be paid $270,000 one year hence. This is a nominal flow, which he discounts at an 10% nominaldiscount rate:PV = $270,000 ÷ 1.10 = $245,455The inflation rate is 5%.Calculate the PV of Mr. Deco's payment using the equivalent real cash flow and real discount rate.Note: Do not round intermediate calculations. Round your "Real cash flow" and "Present value" answers to thenearest whole dollar amount. Enter the "Real discount rate" as a percent rounded to 3 decimal places.Real cash flowReal discount ratePresent value%

Given:Nominal cash flow= $270,000Nominal discount rate= 10% or 0.10inflatiion rate= 5% or 0.05Real…

Answered: Mr. Art Deco will be paid $270,000 one…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 12MC: (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest...

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What is the Discounted Present Value (DPV) if you expect to receive $8,000 in year 1, $9,000 in year 2 and $7,000 in year 3, when the interest rate is 8% in each year? Round your answer to one (1) decimal, do not write the dollar sign. Use the minus sign where appropriate.
What’s the equivalent interest rate to the terms 3/20, n/60? In other words, what is the effective annual rate that is "given" to a customer for this cash discount? (Use 365 days.) HINT: Use the I = P x R x T formula where R = I/PT and choose some value for the gross amount of the invoice (i.e $1,000). Label (%) and round to the nearest whole percent.
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You are offered the choice of two annuities. A: Receive $100 every year for the next ten years. The first payment starts one year from today. B: Receive $204 every two years for the next ten years. The first payment starts two years from today. Without calculating the present values of the annuities, explain how you can obtain the rate of interest per annum that would make you indifferent between the two annuities.
In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $34,000 and the interest rate is 9.50%, the borrower “pays” 0.0950 × $34,000 = $3,230 immediately, thereby receiving net funds of $30,770 and repaying $34,000 in a year. A. What is the effective interest rate on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) B. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 19.50%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Imagine you borrow $490 from your roommate, agreeing to pay her back $490 plus 7 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 4.49 percent. What is the total dollar amount you will have to pay her back in year? What percentage of the interest payment is the result of the real rate of interest? (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 17.54 or 17.54%.)
If you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
magine you borrow $500 from your roommate, agreeing to pay her back $500 plus 12 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 5.94 percent. What is the total dollar amount you will have to pay her back in a year? What approximate percentage of the interest payment is the result of the real rate of interest? Use the simplified Fisher equation. (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 17.54.)Excel Template(Note: This template includes the problem statement as it appears in your textbook. The problem assigned to you here may have different values. When using this template, copy the problem statement from this screen for easy reference to the values you’ve been given here, and be sure to update any values that may have been pre-entered in the template based on the textbook version of the problem.) Total dollar amount $enter a dollar amount rounded to 2 decimal places Approximate…
Forte Company estimates two scenarios of possible future notes receivable uncollectibles and the probability of each not being collected in the next year. The risk-free rate is 4%. (Click the icon to view the scenarios.) (Click the icon to view the Future Value of $1 table.) (Click the icon to view the Future Value of an Ordinary Annuity table.) (Click the icon to view the Future Value of an Annuity Due table. Requirement For each of the scenarios, compute the expected cash flow value based on the probabilities given. Compare the expected cash flows on each case. $ Estimated Loss 55,000 165,000 1,500,000 Total expected cash flow loss - Scenario 1 Scenario 1: Probability of Loss Occurring Scenario 1 Scenario 2 20 % 75 % 5% Expected Cash Flow Loss $ $ 11,000 $ 123,750 75,000 209,750 (Click the icon to view the Present Value of $1 table.) (Click the icon to view the Present Value of an Ordinary Annuity table.) (Click the icon to view the Present Value of an Annuity Due table.) Scenario 2:…
If you put up $45,000 today in exchange for a 6.4 percent, 15-year annuity, what will the annual cash flow be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Annual cash flow
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Imagine you borrow $560 from your roommate, agreeing to pay her back $560 plus 8 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 4.00 percent. What is the total dollar amount you will have to pay her back in a year? What percentage of the interest payment is the result of the real rate of interest? (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 17.54 or 17.54%.) Excol Tompleto

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