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Pani-rosa [81]
3 years ago
15

Hooray! You won the lottery, but you have a choice of taking the $20,000 per year for the next 20 years or taking a lump settlem

ent today. What would be the minimum amount you would accept today if you decide that 8% is a reasonable discount rate
Business
1 answer:
Artyom0805 [142]3 years ago
3 0

Answer:

The minimum value is $196,362.95

Explanation:

Giving the following information:

Cash flow= $20,000

The number of years= 20 years

Interest rate= 8%

First, we need to calculate the future value of the cash flows. We will use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= cash flow

FV= {20,000*[(1.08^20)-1]} /0.08

FV= $915,239.29

Now, we can calculate the present value. The present value is the minimum value yo accept.

PV= FV/(1+i)^n

PV= 915,239.29/ 1.08^20

PV= $196,362.95

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algol [13]

Answer:

824.28

Explanation:

Market price of a bond is the total sum of discounted coupon cashflow and par value at maturity. This is a 4-year bond with semi-annual payment so there will be 8 coupon payment in total. Let formulate the bond price as below:

Bond price = [(Coupon rate/2) x Par]/(1 + Required return/2) + [(Coupon rate/2) x Par]/(1 + Required return/2)^2 + ... + [(Coupon rate/2) x Par + Par]/(1 + Required return/2)^8

Putting all the number together, we have

Bond price = [(4.5%) x 1000]/(1 + 7.5%) + [(4.5%) x 1000]/(1 + 7.5%)^2 + ... + [(4.5%) x 1000 + 1000]/(1 + 7.5%)^8

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7 0
3 years ago
Crossroads Mall had 100,000 outstanding shares of common stock. On June 16, 2018, Crossroads repurchased 20,000 shares of its ow
timofeeve [1]

Answer:

The answer is c. Increase in assests and increase in stockholder's equity.

Explanation:

The accounting entries Crossroads Mall will have for the sell of repurchased shares as followed:

Dr Cash                                                                           280,000

Dr Paid-up capital and/or Retained Earning                 20,000

Cr Common share                                                          300,000

( further calculation notes: sold of 10,000 repurchased shares at $28 brings about 280,000 in cash; while common shares will be recorded at the repurchased price, that is : 30 x 10,000)

Thus, the net effect of the sale of repurchased shares will be the Increase in Cash ( assets) of $280,000 and the Increase in Stock Equity of the same amount, that is, $280,000.

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3 years ago
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income = cash receipts (7,500)

expenses = cash disbursements (8,600)

Cash Balance = 1,800

Plug into the equation

X + 7,500 - 8,600 = 1,800

Then you would solve for X

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