Corporate Finance: A Focused Approach (mindtap Course List)
Corporate Finance: A Focused Approach (mindtap Course List)
7th Edition
ISBN: 9781337909747
Author: Michael C. Ehrhardt, Eugene F. Brigham
Publisher: South-Western College Pub
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Chapter 4, Problem 10P

a.

Summary Introduction

To Determine: The future value compounded for 10 years.

a.

Expert Solution
Check Mark

Answer to Problem 10P

The future value compounded for 10 years is $895.42.

Explanation of Solution

Determine the future value compounded for 10 years using formula

FutureValue=[PresentValue×(1+r)n]=[$500×(1+6%)10]=[$500×1.790848]=$895.42

Therefore, the future value compounded for 10 years using formula is $895.42.

Determine the future value compounded for 10 years using excel

Excel Spreadsheet:

Corporate Finance: A Focused Approach (mindtap Course List), Chapter 4, Problem 10P , additional homework tip  1

Therefore, the future value compounded for 10 years using excel is $895.42.

b.

Summary Introduction

To Determine: The future value compounded for 2 years.

b.

Expert Solution
Check Mark

Answer to Problem 10P

The future value compounded for 2 years is $1,552.92.

Explanation of Solution

Determine the future value compounded for 2 years using formula

FutureValue=[PresentValue×(1+r)n]=[$500×(1+12%)10]=[$500×3.105848]=$1,552.92

Therefore, the future value compounded for 2 years using formula is $1,552.92.

Determine the future value compounded for 2 years using excel

Excel Spreadsheet:

Corporate Finance: A Focused Approach (mindtap Course List), Chapter 4, Problem 10P , additional homework tip  2

Therefore, the future value compounded for 2 year using excel is $1,552.92.

c.

Summary Introduction

To Determine: The present value of due in 1 year.

c.

Expert Solution
Check Mark

Answer to Problem 10P

The present value of due in 1 year is $279.20.

Explanation of Solution

Determine the present value of due in 1 year using formula

PresentValueDue=[FutureValue×(1(1+r)n)]=[$500×(1(1+6%)10)]=[$500×0.558395]=$279.20

Therefore, the present value of due in 1 year is $279.20.

Determine the present value of due in 1 year using excel

Excel Spreadsheet:

Corporate Finance: A Focused Approach (mindtap Course List), Chapter 4, Problem 10P , additional homework tip  3

Therefore, the present value of due in 1 year using excel is $279.20.

d.

Summary Introduction

To Determine: The present value of due in 2 years.

d.

Expert Solution
Check Mark

Answer to Problem 10P

The present value of due in 2 years is $160.99.

Explanation of Solution

Determine the present value of due in 2 years using formula

PresentValueDue=[FutureValue×(1(1+r)n)]=[$500×(1(1+12%)10)]=[$500×0.321973]=$160.99

Therefore, the present value of due in 2 years is $160.99.

Determine the present value of due in 2 years using excel

Excel Spreadsheet:

Corporate Finance: A Focused Approach (mindtap Course List), Chapter 4, Problem 10P , additional homework tip  4

Therefore, the present value of due in 2 years using excel is $160.99.

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