Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return . The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today. The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula: P r e s e n t v a l u e = F u t u r e v a l u e / ( 1 + r a t e ) n Where n denotes the number of periods Also, present value can be computed from the following formula: P r e s e n t v a l u e = F u t u r e v a l u e t o b e r e c e i v e d * P r e s e n t v a l u e o f $ 1 Requirement a: To calculate: Present value if interest is compounded semi- annually

Question

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Answer 1

Question

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.3538= $35,380

Thus, present value of $1, 00,000 when time period is 7 years is $35,380.

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Answer 2

Question

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.3538= $35,380

Thus, present value of $1, 00,000 when time period is 7 years is $35,380.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.3538= $35,380

Thus, present value of $1, 00,000 when time period is 7 years is $35,380.

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Answer 4

Question

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.3538= $35,380

Thus, present value of $1, 00,000 when time period is 7 years is $35,380.

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Answer 5

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.3538= $35,380

Thus, present value of $1, 00,000 when time period is 7 years is $35,380.

Answer 6

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

Answer 7

Chapter 6, Problem 6.16E

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement a:

To calculate:

Present value if interest is compounded semi- annually

Answer 8

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded semi- annually= $46,320

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded semi- annually, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be halved (16/2) i.e. 8% and the time period of 5 years would be doubled (5 years*2) i.e. 10 years. By taking value from the present value table for 8% in 10^t^h period row, the factor value is coming out to be 0.463193. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4632= $46,320

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $46,320.

Answer 13

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

Answer 14

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement b:

To calculate:

Present value if interest is compounded quarterly

Answer 15

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when interest is compounded quarterly= $45,640

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

To calculate the present value of $1, 00,000 when interest is compounded quarterly, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 5 years

Since the time period is semi- annually, the rate of interest of 16% would be 1/4^t^h(16/4) i.e. 4% and the time period of 5 years would be four times (5 years*4) i.e. 20 years. By taking value from the present value table for 4% in 20^t^h period row, the factor value is coming out to be 0.4564. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4564= $45,640

Thus, present value of $1, 00,000 when interest is compounded semi- annually is $45,640.

Answer 20

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

Answer 21

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement c:

To calculate:

Present value if discount rate of 12% is used

Answer 22

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 12%= $56,740

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 12%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 12%

Time period= 5 years

Since the discount rate is 12% and time period of 5 years is given. By taking value from the present value table for 12% in 5^t^h period row, the factor value is coming out to be 0.5674. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.5674= $56,740

Thus, present value of $1, 00,000 when discount rate of 12% is $56,740.

Answer 27

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

Answer 28

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement d:

To calculate:

Present value if discount rate of 20% is used

Answer 29

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when discount rate of 20%= $40,190

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

For calculating the present value of $1, 00,000 when discount rate is 20%, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 20%

Time period= 5 years

Since the discount rate is 20% and time period of 5 years is given. By taking value from the present value table for 20% in 5^t^h period row, the factor value is coming out to be 0.4019. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000*0.4019= $40,190

Thus, present value of $1, 00,000 when discount rate of 20% is $40,190.

Answer 34

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

Answer 35

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement e:

To calculate:

Present value if cash is received in 3 years

Answer 36

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 3 years= $64,070

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 3 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 3 years

Since the discount rate is 16% and time period of 3 years is taken. By taking value from the present value table for 20% in 3^r^d period row, the factor value is coming out to be 0.6407. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.6407= $64,070

Thus, present value of $1, 00,000 when time period is 3 years is $64,070.

Answer 41

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1

Therefore, Present value= $1,00,000* 0.3538= $35,380

Thus, present value of $1, 00,000 when time period is 7 years is $35,380.

Answer 42

To determine

Concept Introduction:

Present value Present value, also known as discounted value is the current value for a future sum of money with a denied rate of return. The present value is computed by using discount rates on the given rate of return. It indicates whether the money received by an investor today would earn a return in the future. It helps to decide whether a particular stock is worth investing in today.

The expected cash flows are discounted at a discount rate which is actually the expected return. Further, the discount rate is inversely proportional to the future cash flows. It can be calculated using the below- mentioned formula:

Present value= Future value/ (1+rate)n

Where n denotes the number of periods

Also, present value can be computed from the following formula:

Present value= Future value to be received* Present value of $1

Requirement f:

To calculate:

Present value if cash is received in 7 years

Answer 43

Expert Solution

Answer to Problem 6.16E

Present value of $1, 00,000 when cash is received in 7 years= $35,380

Answer 44

Expert Solution

Answer 45

Expert Solution

Answer 46

Expert Solution

Answer 47

Explanation of Solution

For calculating the present value of $1, 00,000 when cash is received in 7 years, we will be using the table indicating present value factors.

In the given problem, following information is given:

Future value to be received= $1, 00,000

Rate of interest= 16%

Time period= 7 years

Since the discount rate is 16% and time period of 7 years is taken. By taking value from the present value table for 20% in 7^t^h period row, the factor value is coming out to be 0.3538. Now, the following formula would be used:

Present value= Future value to be received* Present value of $1