The present value of the stream of cash flows is $2,434.26.
<h3>What is the present value?</h3>
Present value is the sum of discounted cash flows. The cash flows would be discounted using the cost of capital.
Present value = C / (1 + r)^n
Where:
- C = cash flow
- r = cost of capital
- n = number of years
-10,000 + [5,000 / 1.1] + [5000 / 1.1²] + [5000 / 1.1³] = $2,434.26
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Answer:
We have to discount these payments to find the present value
500,000
500,000/1.1
500,000/1.1^2
500,000/1.1^3
We keep on doing this until we reach 500,000/1.1^19
After that we add all the payments and get the value. A less time consuming way of doing it is using a financial calculator
Pv=?
N=19
FV=0
PMT=500,000
=4,182,460.05 we add 500,000 to this because the first payment was not discounted=4,682,460.05= Present Value.
Explanation:
They use The Economic Analysis Method to assign an monetary value, because it is often difficult to assign a value. This approach ( The Economic Analysis Method) states that, the patents value is the replacement cost, or at least the right amount to replace the protection right on the invention.
I hope this answered your question! :^)
Answer: Current yield on the bond = 35.71%
Explanation:
Given that,
Annual interest rate printed on the face of a bond = 25 percent
the face value of the bond = $1,000
the current market price of the bond = $700
Therefore,
current yield on the bond = 
= 
= 35.71 %