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3 years ago

8

Your company will generate 73,000 in annual revenue each year for the next eight years from a new information database. If the a

ppropriate interest rate is 8.5 percent, what is the present value of the savings?

1 answer:

lys-0071 [83]3 years ago

4 0

$73,000x8.5%=$6,205 for one year
I believe you are looking for either this number or $6,205x8?
$49,640 for 8 years

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4 years ago

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Answer:

A)

before decrease in rates: 706,483

after rate decrease: 751,360

B)

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discount on BP 3,015.12

cash 32,000

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C)

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discount on BP 3,165.87

cash 32,000

--second interest payment--

D)

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Explanation:

First, we solve for the present value of the bond to get the proceeds from the issuance.

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

C 32,000

time 20

rate 0.05

$32000 \times \frac{1-(1+0.05)^{-20} }{0.05} = PV\\$

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$\frac{800000}{(1 + 0.05)^{20} } = PV$

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# / Principal/ paid / interest / Amort/End. P

1 700,302 32000 35015.12 3015.12 703,317

2 703,317 32000 35165.87 3165.87 706,483

Now, we have to redo the calculations for the bonds market value considering a decrease in the market rate to 9%

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

C 32,000

time 18

rate 0.045

$32000 \times \frac{1-(1+0.045)^{-18} }{0.045} = PV\\$

PV $389,119.7377

$\frac{Maturity}{(1 + rate)^{time} } = PV$

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rate 0.045

$\frac{800000}{(1 + 0.045)^{18} } = PV$

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Explanation:

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