Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Question
Chapter 5, Problem 5.13P
Subpart (a)
Summary Introduction
To calculate:
Introduction:
Present value (PV): The present value refers to the today’s value of a future amount.
Subpart (b)
Summary Introduction
To determine: How much the Jim Nance will invest.
Subpart (c)
Summary Introduction
To determine:
Expert Solution & Answer
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Students have asked these similar questions
Jim Nance has been offered an investment that will pay him
$860
three years from today.
a. If his opportunity cost is
9%
compounded annually, what value should he place on this opportunity today?
b. What is the most he should pay to purchase this payment today?
c. If Jim can purchase this investment for less than the amount calculated in part
(a),
what does that imply about the rate of return that he will earn on the investment?
Suppose you invest $3,000 today and receive $10,000 in 25 years.
a. What is the internal rate of return (IRR) of this opportunity?
b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the
amount you will receive each year?
a. What is the internal rate of return (IRR) of this opportunity?
The IRR of this opportunity is%. (Round to two decimal places.)
b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the
amount you will receive each year?
The periodic payment that gives the same IRR is $
(Round to the nearest cent.)
Suppose you invest $2,000 today and receive $11,000 in five years.
a. What is the internal rate of return (IRR) of this opportunity?
b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has
the same IRR as the first one, what is the amount you will receive each year?
Chapter 5 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 5.1 - What is the difference between future value and...Ch. 5.1 - Define and differentiate among the three basic...Ch. 5.2 - Prob. 5.3RQCh. 5.2 - Prob. 5.4RQCh. 5.2 - Prob. 5.5RQCh. 5.2 - Prob. 5.6RQCh. 5.2 - Prob. 5.7RQCh. 5.3 - What is the difference between an ordinary annuity...Ch. 5.3 - What are the most efficient ways to calculate the...Ch. 5.3 - How can the formula for the future value of an...
Ch. 5.3 - Prob. 5.13RQCh. 5.3 - What is a perpetuity? Why is the present value of...Ch. 5.4 - How do you calculate the future value of a mixed...Ch. 5.5 - What effect does compounding interest more...Ch. 5.5 - Prob. 5.21RQCh. 5.5 - Differentiate between a nominal annual rate and an...Ch. 5.6 - How can you determine the size of the equal,...Ch. 5.6 - Prob. 5.27RQCh. 5.6 - How can you determine the unknown number of...Ch. 5 - Learning Goals 2, 5 ST5-1 Future values for...Ch. 5 - Learning Goal 3 ST5-2 Future values of annuities...Ch. 5 - Prob. 5.3STPCh. 5 - Learning Goal 6 ST5-4 Deposits needed to...Ch. 5 - Assume that a firm makes a 2,500 deposit into a...Ch. 5 - Prob. 5.2WUECh. 5 - Prob. 5.3WUECh. 5 - Your firm has the option of making an investment...Ch. 5 - Joseph is a friend of yours. He has plenty of...Ch. 5 - Jack and Jill have just had their first child. If...Ch. 5 - Prob. 5.1PCh. 5 - Learning Goal 2 P5-2 Future value calculation...Ch. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Learning Goal 2 P5- 6 Time value As part of your...Ch. 5 - Learning Goal 2 P5-7 Time value you can deposit...Ch. 5 - Learning Goal 2 P5-8 Time value Misty needs to...Ch. 5 - Learning Goal 2 P5- 9 Single-payment loan...Ch. 5 - Prob. 5.10PCh. 5 - Prob. 5.11PCh. 5 - Prob. 5.12PCh. 5 - Prob. 5.13PCh. 5 - Time value An Iowa state savings bond can be...Ch. 5 - Time value and discount rates You just won a...Ch. 5 - Prob. 5.16PCh. 5 - Cash flow investment decision Tom Alexander has an...Ch. 5 - Learning Goal 2 P5-18 Calculating deposit needed...Ch. 5 - Future value of an annuity for each case in the...Ch. 5 - Present value of an annuity Consider the following...Ch. 5 - Learning Goal 3 P5-21 Time value: Annuities Marian...Ch. 5 - Learning Goal 3 P5-22 Retirement planning Hal...Ch. 5 - Learning Goal 3 P5-23 Value of a retirement...Ch. 5 - Learning Goal 2, 3 P5-25 Value of an annuity...Ch. 5 - Prob. 5.26PCh. 5 - Prob. 5.30PCh. 5 - Learning Goal 4 P5-31 Value of a single amount...Ch. 5 - Value of mixed streams Find the present value of...Ch. 5 - Prob. 5.33PCh. 5 - Prob. 5.34PCh. 5 - Prob. 5.36PCh. 5 - Prob. 5.37PCh. 5 - Changing compounding frequency Using annual,...Ch. 5 - Prob. 5.39PCh. 5 - Prob. 5.40PCh. 5 - Compounding frequency and time value You plan to...Ch. 5 - Learning Goals 3, 5 P5-42 Annuities and...Ch. 5 - Prob. 5.43PCh. 5 - Prob. 5.44PCh. 5 - Prob. 5.45PCh. 5 - Prob. 5.46PCh. 5 - Prob. 5.47PCh. 5 - Loan amortization schedule Joan Messineo borrowed...Ch. 5 - Prob. 5.49PCh. 5 - Prob. 5.50PCh. 5 - Prob. 5.52PCh. 5 - Prob. 5.53PCh. 5 - Prob. 5.54PCh. 5 - Prob. 5.55PCh. 5 - Prob. 5.56PCh. 5 - Prob. 5.57PCh. 5 - Number of years needed to acccumulate a future...Ch. 5 - Prob. 5.59PCh. 5 - Prob. 5.60PCh. 5 - Time to repay Installment loan Mia Saito wishes to...
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Similar questions
- An investor is considering the following opportunity: He will put capital into a start-up company today. He will not receive any cash flows from the investment until end of the 5th year. At that point, he will receive 11.00 years of $20,000.00 per year. If his discount rate on this investment is 14.00%, what is the value of this opportunity today?arrow_forwardYou have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1,500 two years from now, and $10,000 ten years from now. a. What is the NPV of the investment opportunity if the interest rate is 8% per year? Should you take the opportunity? b. What is the NPV of the investment opportunity if the interest rate is 4% per year? Should you take the opportunity? a. What is the NPV of the investment opportunity if the interest rate is 8% per year? The NPV of the investment opportunity if the interest rate is 8% per year is $. (Round to the nearest dollar.) Should you take the investment opportunity (Select the best choice below.) A. Reject it because the NPV is less than 0. B. Take it because the NPV is equal to or greater than 0. b. What is the NPV of the investment opportunity if the interest rate is 4% per year? The NPV of the investment opportunity if the interest rate is 4% per year is $ (Round to the nearest dollar.) Should…arrow_forwardYou have an investment opportunity that requires an initial investment of $5,500 today and will pay $11,500 in one year. What is the IRR of this opportunity?arrow_forward
- I am having problem on finding the PWarrow_forwardYou have just made your first $5,500 contribution to your retirement account. Assuming you earn a return of 10 percent per year and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 10 years before contributing? (Does this suggest an investment strategy?) Input area: Present value Interest rate Number of years Number of years (Use cells A6 to 89 from the given information to complete this question. Your answer should be a positive value.) Output area: $5,500 10% 45 35 Future value Future value $arrow_forwardAn example of how to calculate net present value is done using the following. Imagine you have been given an investment opportunity wherein if you invest $1,200 today, you will receive $650 dollars at the end of each year for the next 5 years. You could separately choose to invest your money at 10% interest each year. Should you take the investment opportunity? To find the answer, use the NPV formula:arrow_forward
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