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Arlecino [84]
3 years ago
15

Your neighbor Bob has two annuities. The first annuity will pay him $10,000 per month for the next 10 years. The second annuity

will pay him $15,000 per month for the following 10 years (years 11 through 20). Assuming a discount rate of 6%, what is the present value of the annuities?
Business
1 answer:
german3 years ago
6 0

Answer:

$1,643,344.308

Explanation:

These are Ordinary annuities because if it is not mentioned that the payments are made at the <em>beginning </em>of the year which is the case for Annuity Due.

You can use a financial calculator to find the Present value of these two ordinary annuities.

<u> PV of Annuity 1 from (yr1-yr10)</u>

Recurring payment; PMT = 10,000

Total duration ; N = 10 *12 = 120 months

Monthly interest rate in this case ; I/Y = 6%/12 = 0.50%

Future value ; FV = 0 (use 0 if annuity variable is not given )

then CPT PV= $900,734.533

<u>PV of Annuity 1 from (yr11-yr20)</u>

This will happen in 2 steps sice it is a forward-starting annuity;

Recurring payment; PMT = 15,000

Total duration ; N = 10 *12 = 120 months

Monthly interest rate in this case ; I/Y = 6%/12 = 0.50%

Future value ; FV = 0 (use 0 if annuity variable is not given )

then CPT PV( at t=10)= $1,351,101.80

Next find the PV of $1,351,101.80  at t=0;

$1,351,101.80 /(1.005^120) = $742,609.7754

Next, find the sum of these two PVs to find the answer;

=$900,734.533 + $742,609.7754

PV = $1,643,344.308

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Answer:

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Explanation:

<em>The value of a business can be determined using the free cash flow model. According to this model, the value of a firm is is the present value of its free cash flow discounted at the weigthed average cost of capital (WACC.)</em>

<em>The value of equity is the value of firm less value of other instruments (e.g debt and preferred stocks)</em>

<em>Value of equity = Value of the entire firm - Value of debt </em>

We can work out the the value per share using the steps below:

<em>Step 1</em>

<em>Calculate the total value of the firm</em>

Value of firm =  27.50/(0.1-0.07)

 = $916.66 million

<em>Step 2</em>

<em>Calculate the value of equity</em>

<em>Value of equity = Value of the entire firm - Value of debt</em>

= $916.66 million - $125.0 million

=791.666 million

<em>Step 3</em>

<em>Calculate the value per share</em>

Value per share = Value of equity/ units of common stock

=$791.666 million/15 million units

= $52.78 per share

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1.Based on the information given the production budget for the third quarter is 148,500.

2. Budgeted cost of direct material purchases is 4,425,000.

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1. Budgeted production

BLACK DIAMOND COMPANY

Production Budget (in units) Third Quarter

Budgeted units sales 150,000  

Add: Budgeted ending inventory 3,500  

Less: Budgeted beginning inventory (5,000)

Budgeted production 148,500

2. Direct material budget

BLACK DIAMOND COMPANY  

Direct Materials Budget Third Quarter  

Budgeted production  148,500 units

Materials requirement per unit 2  

Materials needed for production 297,000

(148,500units×2)

Budgeted ending inventory 4,000  

Total material requirements(lbs.) 301,000

(297,000+4,000)

Budgeted beginning inventory 6000  

Direct Materials to be purchased (lbs.) 295,000

(301,000-6,000)

Materials price per pound 15.00per  

Budgeted cost of direct material purchases 4,425,000

(295,000×15 per)

3. Direct labor budget

BLACK DIAMOND COMPANY  

Direct labor  Budget Third Quarter

Budgeted Production             148,500

Budgeted Direct labor hours  74,250

(148,500×0.5)      

Budgeted Direct labor cost  $1,485,000

(74,250×$20)  

4. Factory overhead budget

BLACK DIAMOND COMPANY  

Factory Overhead Budget Third Quarter

Variable overhead                    $594,000

(74,250×$8)

Add Fixed overhead                $1,782,000

Total  factory overhead           $2,376,000

Learn more here:brainly.com/question/16381677

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