Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337395250
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 5, Problem 5Q
Summary Introduction
To identify: Whether the given statement is true or false.
Introduction:
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To find the present value of an uneven series of cash flows, you must find the PVs of the individual cash flows and then sum them. Annuity procedures can never be of use, even when some of the cash flows constitute an annuity, because the entire series is not an annuity. True or false? Explain.NOTE: GIVE CONCEPTUAL ANSWER IN 4 line MAximum
Which of the following arguments about time line is right?Group of answer choices
a)Time line can be construct for annuity only.
b)Time line is useful no matter the payment is constant or not.
C)Time line is useless when the cash flow is uneven.
d)Time line is only useful when the payment is constant.
Which of the following statements is CORRECT?
a. The future value of an annuity table is most useful in the short-cut calculation of the future value of uneven cash flows.
b. The formula or equation for the calculation of the present value can be used only in even cash flows that are paid or received at regular time intervals and subject to a constant discount rate.
c. The present value of an annuity table is most useful in the short-cut calculation of the present value of uneven cash flows.
d. The formula or equation for the calculation of the future value can be used also in regular annuity and subject to a fluctuating rate of return.
Chapter 5 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 5 - Prob. 1QCh. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - The present value of a perpetuity is equal to the...Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - What is a loan amortization schedule, and what are...Ch. 5 - FUTURE VALUE If you deposit 2,000 in a bank...Ch. 5 - Prob. 2P
Ch. 5 - FINDING THE REQUIRED INTEREST RATE Your parents...Ch. 5 - TIME FOR A LUMP SUM TO DOUBLE If you deposit money...Ch. 5 - TIME TO REACH A FINANCIAL GOAL You have 33,556.25...Ch. 5 - FUTURE VALUE: ANNUITY VERSUS ANNUITY DUE Whats the...Ch. 5 - PRESENT AND FUTURE VALUES OF A CASH FLOW STREAM An...Ch. 5 - LOAN AMORTIZATION AND EAR You want to buy a car,...Ch. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - GROWTH RATES Sawyear Corporations 2017 sales were...Ch. 5 - EFFECTIVE RATE OF INTEREST Find the interest rates...Ch. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - PRESENT VALUE OF AN ANNUITY Find the present...Ch. 5 - Prob. 16PCh. 5 - EFFECTIVE INTEREST RATE You borrow 230,000; the...Ch. 5 - Prob. 18PCh. 5 - FUTURE VALUE OF AN ANNUITY Your client is 26 years...Ch. 5 - Prob. 20PCh. 5 - EVALUATING LUMP SUMS AND ANNUITIES Kristina just...Ch. 5 - Prob. 22PCh. 5 - FUTURE VALUE FOR VARIOUS COMPOUNDING PERIODS Find...Ch. 5 - Prob. 24PCh. 5 - FUTURE VALUE OF AN ANNUITY Kind the future values...Ch. 5 - PV AND LOAN ELIGIBILITY You have saved 4,000 for a...Ch. 5 - EFFECTIVE VERSUS NOMINAL INTEREST RATES Bank A...Ch. 5 - Prob. 28PCh. 5 - BUILDING CREDIT COST INTO PRICES Your firm sells...Ch. 5 - Prob. 30PCh. 5 - REQUIRED LUMP SUM PAYMENT Starting next year, you...Ch. 5 - REACHING A FINANCIAL GOAL Six years from today you...Ch. 5 - FV OF UNEVEN CASH FLOW You want to buy a house...Ch. 5 - AMORTIZATION SCHEDULE a. Set up an amortization...Ch. 5 - Prob. 35PCh. 5 - NONANNUAL COMPOUNDING a. You plan to make five...Ch. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - REQUIRED ANNUITY PAYMENTS A father is now planning...Ch. 5 - Prob. 41SPCh. 5 - Prob. 42IC
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Similar questions
- The payback period method has been criticized for not taking the time value of money intoaccount. Could this limitation be overcome? If so, would this method then be preferable to theNPV method?arrow_forwardWhat is the cost of accrued liabilities? If accruals have such a low cost, why don’tfirms use them even more?arrow_forwardWhich is incorrect regarding annuities? A. Annuities do not use the pooling technique to spread risk B. An owner may change the annuity date, the beneficiary, or the settlement option C. Once the payout period begins, the annuitant receives periodic payments D. The accumulation period is the period prior to the annuitization date 6.arrow_forward
- Why is it true that a reinvestment rate is implicitly assumed whenever we find thepresent value of a future cash flow? Would it be possible to find the PV of a FV withoutspecifying an implicit reinvestment rate?arrow_forwardDescribe the essential differences between the following cash flow streams: Annuity versus perpetuity Annuity due versus ordinary annuity Illustrate with an example each.arrow_forwardIn order to recognize a question that requires fv of an annuity formula rather than just fv, noticing if interest is compounded?arrow_forward
- An annuity is a series of---------------cash flows a)different b)even c)not necessarily same d)not necessarily evenarrow_forwardWhy do the payback period analysis fail to recognize the difference between the present and future value of money?arrow_forwardBased on your understanding of the fAactors that affect the cost of money, Identify which of the following statement is true. a. higher inflation leads to lower interest rates. b. Interest is the price paid to borrow funds. c. Higher risk leads to lower interest rates.arrow_forward
- Technical problems associated with the internal rate of return include: a. the possibility of multiple IRRs, which rarely present practical difficulties b. the assumption that all cash flows are reinvested at the IRR c. neither of the above d. both of the abovearrow_forwardWhich of the following is a disadvantage of the average rate of return method? a. fails to consider the time value of money b. includes the amount of income earned over the entire life of the proposal c. emphasizes accounting income d. difficult to usearrow_forwardAll else being equal, if an annuity's cash flows increase, the present value of the annuity increases. True Falsearrow_forward
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