MICROECONOMICS-MINDTAP (1 TERM)
MICROECONOMICS-MINDTAP (1 TERM)
13th Edition
ISBN: 9780357686942
Author: Arnold
Publisher: CENGAGE L
Question
Book Icon
Chapter 16, Problem 1WNG

(a)

To determine

Calculate the present value.

(a)

Expert Solution
Check Mark

Explanation of Solution

The present value (PV) can be calculated using the formula given below:

PV=An(1+i)n        (1)

Here

An is the actual amount of income.

 i is the interest rate.

n is the number of years in the future.

Since An is $25,000, i is 7%, and n is 4 years, the value of PV can be calculated using Equation-1 as follows:

PV=$25,000(1+0.07)1+$25,000(1+0.07)2+$25,000(1+0.07)3+$25,000(1+0.07)4=$23,364.49+$21,835.976+$20,407.45+$19,072.38=$84,680.28

Thus, PV is $84,680.28.

Economics Concept Introduction

Present value: The present value measures the value today of a future cash flow or a series of cash flows.

(b)

To determine

Calculate the present value.

(b)

Expert Solution
Check Mark

Explanation of Solution

Since An is $152,000, i is 6%, and n is 5 years, the value of PV can be calculated using Equation-1 as follows:

PV=$152,000(1+0.06)1+$152,000(1+0.06)2+$152,000(1+0.06)3+$152,000(1+0.06)4+$152,000(1+0.06)5=$143,396.2+$135,279.5+$127,622.1+$120,398.2+$113,583.2=$640,279.3

Thus, PV is $640,279.3.

(c)

To determine

Calculate the present value.

(c)

Expert Solution
Check Mark

Explanation of Solution

Since An is $60,000, i is 6.5%, and n is10 years, the value of PV can be calculated using Equation-1 as follows:

PV=$60,000(1+0.065)1+$60,000(1+0.065)2+$60,000(1+0.065)3+$60,000(1+0.065)4+$60,000(1+0.065)5+$60,000(1+0.065)6+$60,000(1+0.065)7+$60,000(1+0.065)8+$60,000(1+0.065)9+$60,000(1+0.065)10=$56,338.03+$52,899.56+$49,670.95+$46,6369.39+$43,792.85+$41,120.05+$38,610.37+$36,253.87+$34,041.19+$31,963.56=$431,329.8

Thus, PV is $431,329.8.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
What are the answers for a,b,c,d? Are they supposed to be numerical answers or in terms of a variable?
Sue is a sole proprietor of her own sewing business. Revenues are $150,000 per year and raw material (cloth, thread) costs are $130,000 per year. Sue pays herself a salary of $60,000 per year but gave up a job with a salary of $80,000 to run the business. ○ A. Her accounting profits are $0. Her economic profits are - $60,000. ○ B. Her accounting profits are $0. Her economic profits are - $40,000. ○ C. Her accounting profits are - $40,000. Her economic profits are - $60,000. ○ D. Her accounting profits are - $60,000. Her economic profits are -$40,000.
Select a number that describes the type of firm organization indicated. Descriptions of Firm Organizations: 1. has one owner-manager who is personally responsible for all aspects of the business, including its debts 2. one type of partner takes part in managing the firm and is personally liable for the firm's actions and debts, and the other type of partner takes no part in the management of the firm and risks only the money that they have invested 3. owners are not personally responsible for anything that is done in the name of the firm 4. owned by the government but is usually under the direction of a more or less independent, state-appointed board 5. established with the explicit objective of providing goods or services but only in a manner that just covers its costs 6. has two or more joint owners, each of whom is personally responsible for all of the partnership's debts Type of Firm Organization a. limited partnership b. single proprietorship c. corporation Correct Number
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Microeconomics A Contemporary Intro
Economics
ISBN:9781285635101
Author:MCEACHERN
Publisher:Cengage
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Microeconomics
Economics
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co