Present Value of Amounts Due Tommy John is going to receive $520,000 in three years. The current market rate of interest is 13%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1 b. Why is the present value less than the $520,000 to be received in the future? The present value is less due to over the 3 years.

Present Value of Amounts Due Tommy John is going to receive $520,000 in three years. The current market rate of interest is 13%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1 b. Why is the present value less than the $520,000 to be received in the future? The present value is less due to over the 3 years.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8EA: You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how...

See similar textbooks

Related questions

Q: What per period interest rate should you use in the annuity formula to do this calculation? In other…

A: The effective annual interest rate is a crucial concept in finance that is used to describe the true…

Q: Find the present value of the given future amount. $43,000 for 22 months at 5% simple interest

A: Answer Future Value $43,000 Time 22 Months Period In Years 1.83 Years Rate 5%

Q: Present Value of Amounts Due Assume that you are going to receive $460,000 in 10 years. The current…

A: Present value of a single cashflow = C/(1+r)n Where, C = future cashflow =$460000 r = interest rate…

Q: What is the present value of $1,200 due in 14 years at a 5 percent interest rate and 11 percent…

A: The PV of an investment is based on the concept of the Time Value of Money which states that money…

Q: As shown in Table, $1,000 invested at 10 percent compound interest will grow into $1,331 after three…

A: Present Value is the current value of a cash flow that can be occurred in future. To find the…

Q: 1.Compute the present value of an annuity of $503 per year for 18 years, given a discount rate of 8…

A: The present value of money is a financial concept that refers to the current worth of a future sum…

Q: Find the present value of the given future amount. $59,000 for 3 months at 5% simple interest What…

A: Here,FutureValue is $59,000Rate is 5%Time is 3 months or 0.25 years

Q: What is the present value (PV) today of a stable perpetuity that pays $11,000 every 3 years,…

A: The regular amount that is received or paid after a specific time period rather than immediately…

Q: Borrow $5,000,000 from a bank quoted 3.4% annual interest rate and do quarterly payments of…

A: according to the question given, loan (P)=$5,000,000 apr (r) = 3.4%period /year (m)= 4payment (year)…

Q: Give your answers to the nearest cent. A. Find the future value of $5,500 deposited for four years…

Q: You are considering taking out a loan of $10,000.00 that will be paid back over 6 years with monthly…

A: Unpaid balance can be calculated by using loan amortization formula mention below. Unpaid loan(Loan…

Q: What is the future value of a $200 annual payment over 10 years if interest rates are 6 percent…

A: The given details are:Required: Compute the future value & future value due.

Q: 3. *A savings plan requires an investor to pay 10 installments, each one of $500, due at the end of…

A: The concept of money's time worth indicates that any sum of money is worth more currently than the…

Q: Classify the financial problem. Assume a 4% interest rate compounded annually. Find the value of a…

A: Future value deals with the value of money at a future date which is different from the value today…

Q: What is the present value of $6,000 paid at the end of each of the next 87 years if the interes The…

A: Present value is today equivalent value of cash flows that are to be received in the future period…

Q: Let us assume that Batts will invest $30,200 each year for next 30 years. Assuming the interest rat…

A: Future value refers to the value of the current asset at some future date affected by inflation and…

Q: n 3 years you are to receive 5,000. If the interest rate were to suddenly increase, the present…

A: solution In 3 years you are to receive 5,000. If the interest rate were to suddenly increase, the…

Q: John takes out a loan for $9600 at 10% interest compounded monthly and is making payments of $136 a…

A: Time value of money is a financial concept which is used to calculate the value of money in present…

Q: Suppose you have deposited $10,000 in your high-yield saving account today. The savings account pays…

A: Initially, we shall calculate the amount available in the account after 1.5 years which can be…

Q: A savings plan requires an investor to pay 10 installments, each one of $500, due at the end of…

A: Here, Annuity payment “PMT” = $500 Number of years “n”= 10 Effective interest rate “r”= 5% Value at…

Q: (Present-value comparison) You are offered $1.300 today, $6,000 in 10 years or $26.000 in 23 years.…

A: The present value is the discounted value of the future value of the investment.

Question

Present Value of Amounts Due

Tommy John is going to receive $520,000 in three years. The current market rate of interest is 13%.

a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar.
$fill in the blank 1

b. Why is the present value less than the $520,000 to be received in the future?
The present value is less due to

over the 3 years.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the fifth year. B. Use the future value of $1 table in Appendix B and verity that your answer is correct.
You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how much will you have in the bank after one year? Calculate the amount you will have in the bank at the end of year two and continue to calculate all the way to the end of the third year. B. Use the future value of $1 table In Appendix B and verify that your answer is correct.
You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuity
(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?
Define the stated (quoted) or nominal rate INOM as well as the periodic rate IPER. Will the future value be larger or smaller if we compound an initial amount more often than annually—for example, every 6 months, or semiannually—holding the stated interest rate constant? Why? What is the future value of $100 after 5 years under 12% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding? What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?
Use the tables in Appendix B to answer the following questions. A. If you would like to accumulate $2,500 over the next 4 years when the interest rate is 15%, how much do you need to deposit in the account? B. If you place $6,200 in a savings account, how much will you have at the end of 7 years with a 12% interest rate? C. You invest $8,000 per year for 10 years at 12% interest, how much will you have at the end of 10 years? D. You win the lottery and can either receive $750,000 as a lump sum or $50,000 per year for 20 years. Assuming you can earn 8% interest, which do you recommend and why?
Present Value of Amounts Due Assume that you are going to receive $690,000 in 10 years. The current market rate of interest is 7%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar.$fill in the blank 1 b. Why is the present value less than the $690,000 to be received in the future?The present value is less due to over the 10 years.
Present Value of Amounts Due Assume that you are going to receive $620,000 in 10 years. The current market rate of interest is 5.5%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. 6,599,39 X b. Why is the present value less than the $620,000 to be received in the future? The present value is less due to inflation X over the 10 years.
Present Value of Amounts Due Assume that you are going to receive $730,000 in 10 years. The current market rate of interest is 4.5%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $730,000 to be received in the future? The present value is less due to the compounding of interest V over the 10 years.
Present Value of Amounts Due Assume that you are going to receive $210,000 in 10 years. The current market rate of interest is 11%. a. Using the present value of $1 table in Exhibit 5, determine the present value of this amount compounded annually. Round to the nearest whole dollar. $fill in the blank 1 1,378, 329 b. Why is the present value less than the $210,000 to be received in the future? The present value is less due to the compounding of interest over the 10 years.
Tommy John is going to receive $370,000 in three years. The current market rate of interest is 7%. a. Using the present value of $1 table in Exhibit 8, determine the present value of this amount compounded annually. Round to the nearest whole dollar. b. Why is the present value less than the $370,000 to be received in the future? The present value is less due to over the 3 years.
Present value of amounts due Assume that you are going to receive $ 50,000 in 10 years. The current market rate of interest is 4%. A.Using the present value of $ 1 table in Exhibit s, determine the present value of this amount compounded annually. B.why is the present value less than the $50,000 to be received in the future?