Calculate the equivalent annual value.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01

Equivalent annual value is $5,6786.01.

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

A linear programming computer package is needed. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars). Year 1 2 3 4 5 6 Payment 170 195 220 265 295 440 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securities (par value = $1,000). Funds not invested in these securities will be placed in savings. Security Current Price Rate (%) Years to Maturity 1 $1,055 6.750 3 2 $1,000 5.125 4 Assume that interest is paid annually. The plan will be submitted to the judge and, if approved,…

On the 1st of April 2018, the South African National Treasury increase the value-added tax rate from 14% to 15%. This policy change had a wide-ranging impact on society. Discuss some of the benefits and drawbacks of making use of this type of tax to generate government revenue and what we may expect in terms of its impact on inflation and GDP growth within the economy. Please use some of the economics graphs to explain some scenarios

Eskom is South Africa’s monopoly power producer which the majority of South Africans depend on. Suppose there is extensive deregulation in the power industry. What is the impact of this deregulation on the industry? Help me on discussing the new market structure as well as the impact on supply and demand. Use the relevant diagrams.

Answer 2

Question

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01

Equivalent annual value is $5,6786.01.

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!

Answer 3

Question

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01

Equivalent annual value is $5,6786.01.

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!

Answer 4

Question

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01

Equivalent annual value is $5,6786.01.

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!

Answer 5

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01

Equivalent annual value is $5,6786.01.

Answer 6

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01

Equivalent annual value is $5,6786.01.

Answer 7

Chapter 4, Problem 63P

To determine

Calculate the equivalent annual value.

Answer 8

Expert Solution & Answer

Explanation of Solution

Equivalent cash flow (CF1) from year 1 to 3 is $5,000. Interest rate 1 (i1) is 10%. Time period 1 is 3 years. Cash flow (CF2) from year 4 to 5 is $7,000. Time period 2 (n2) is 5 years. Interest rate (i2) is 12%.

Present value (P) in year can be calculated as follows:

P=(CF1((1+i1)n1−1i1(1+i1)n1))+CF1((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)=(5,000((1+0.1)3−10.1(1+0.1)3))+7,000((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)=(5,000(1.331−10.1(1.331)))+7,000(1.2544−10.12(1.2544))(11.331)=(5,000(0.3310.1331))+7,000(0.25440.150528)(0.751315)=(5,000(2.486852))+7,000(1.690051)(0.751315)=12,434.26+8,888.32=21,322.58

Present value is $21,322.58.

Equivalent annual value (A) can be calculated as follows:

21,322.58=(A((1+i1)n1−1i1(1+i1)n1))+A((1+i2)n2−n1−1i2(1+i2)n2−n1)(1(1+i1)n1)21,322.58=(A((1+0.1)3−10.1(1+0.1)3))+A((1+0.12)5−3−10.12(1+0.12)5−3)(1(1+0.1)3)21,322.58=(A(1.331−10.1(1.331)))+A(1.2544−10.12(1.2544))(11.331)21,322.58=(A(0.3310.1331))+A(0.25440.150528)(0.751315)21,322.58=(A(2.486852))+A(1.690051)(0.751315)21,322.58=2.486852A+1.269761A21,322.58=3.756613AA=21,322.583.756613=5,676.01