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nika2105 [10]
3 years ago
8

You have just won the state lottery and have two choices for collecting your winnings. You can collect $100,000 today or receive

$20,000 at the end of each year for the next seven years. A financial analyst has told you that you can earn 10% on your investments. Calculate the present value of both the options. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.)
Business
1 answer:
WINSTONCH [101]3 years ago
3 0

Answer:

The present value Option 1 = $100,000

The present value Option 2 =$97.368,57‬

Explanation:

The formula to calculate Present Values is equal to:

Present Value = FV / (1+r) ∧n

Let´s calculate Present Value for Option 2:

PV1 =   $20,000 / (1+0,10) ∧ 1= $18,181.82

PV2 =  $20,000 / (1+0,10) ∧ 2= $16,528.92

PV3 =  $20,000 / (1+0,10) ∧ 3= $15,026.29

PV4 =  $20,000 / (1+0,10) ∧ 4= $13,660.26

PV5 =  $20,000 / (1+0,10) ∧ 5= $12,418.42

PV6 =  $20,000 / (1+0,10) ∧ 6=  $11,289.47

PV7 =  $20,000 / (1+0,10) ∧ 7= $10,263.16

PV1 + PV2 +PV3 +PV4 + PV5 + PV6 + PV7 = $97.368,57‬

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shusha [124]

Answer:

$33.93

Explanation:

First, find the present value of each year's dividend at 15% required rate of return;

(PV of D1 ) = 4.40 / (1.15) = 3.8261

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Next, find terminal Cashflow;

D3 = D2 (1+g)

D3 = 4.50 (1.02) = 4.59

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7 0
3 years ago
If $1,000 is deposited in a certain bank account and remains in the account along with any accumulated interest, the dollar amou
Naddika [18.5K]

Answer:

The rate is greater than 8%

Explanation:

Given

\small I = 1,000 \left (\left (1+\frac{r}{100} \right )^{n}-1 \right )

<em>Missing part of question</em>

I =210

n =2

Required

Is r > 1

We have:

\small I = 1,000 \left (\left (1+\frac{r}{100} \right )^{n}-1 \right )

Substitute values for r and I

210 = 1,000 \left (\left (1+\frac{r}{100} \right )^{2}-1 \right )

Divide both sides by 1000

0.210 = \left (\left (1+\frac{r}{100} \right )^{2}-1 \right )

Add 1 to both sides

1.210 = (1+\frac{r}{100} \right ))^{2}

Take square roots of both sides

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1.1 = 1+\frac{r}{100}

Subtract 1 from both sides

0.1 = \frac{r}{100}

Multiply both sides by 100

r = 10

10 > 8

<em></em>

<em>Hence, the rate is greater than 8%</em>

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3 years ago
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spin [16.1K]
It' typically takes around four years to earn a Bachelor's degree. so i would say either C or D but since it says the BEST answer i would choose D

6 0
3 years ago
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Answer:

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