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3 years ago

You expect to receive a payment of $600 one year from now. Answer the following questions and show your calculations:

Business

1 answer:

m_a_m_a [10]3 years ago

4 0

Answer:

Instructions are below.

Explanation:

Giving the following information:

You expect to receive a payment of $600 one year from now.

A) Discount rate= 6%

We need to use the following formula:

PV= FV/(1+i)^n

PV= 600 / (1.06)= $566.04

B) Discount rate= 7%

PV= 600 / (1.07)= $560.75

C) The future value of a certain cash flow declines when the interest rate (discount rate) increases or "n" (time) increases.

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It should be noted that the unearned warranty revenue is a characteristic of both the sales approach for service-type warranties and the expense approach for assurance-type warranties.

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3 years ago

Refer to Exhibit 7.4, which shows short-run average cost curves. Average cost is lowest for a medium plant when output is _____

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Answer: c) between Qa and Qb

Explanation:

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3 years ago

1 . Perpetuities Perpetuities are also called annuities with an extended or unlimited life. Based on your understanding of perpe

Dmitrij [34]

Answer:

(A) A perpetuity is a stream of regularly timed, equal cash flows that continues forever

(B) The value of a perpetuity is equal to the sum of the present value of its expected future cash flows

the bank offers 1.6%

in the alternative scenario it offers 1.067%

Explanation:

(A) A perpetuity is a stream of regularly timed, equal cash flows that continues forever

The perpetuity is an annuity in which time tends to infinity, to be qualified as an annuity the cash payment must be regular.

(B) The value of a perpetuity is equal to the sum of the present value of its expected future cash flows

As state above the perpetuinty is an annuity, the annuities return the present value of the expcted future cash flow.

Given the annuity formula

$C \times \frac{1-(1+r)^{-time} }{rate} = PV\\$

if times tends to infinity then the expression:

$\lim_{n \to \infty} (1+r)^{-n} = 1$

Nexti n the annuity formula we got:

$C \times \frac{1-1 }{rate}= PV\\$

So we end up with C / rate = PV

which s the perpetuity formula

800/50000 = 0.016 = 1.6%

800/75000 = 0.0106667 = 1.067%

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