Problem 5-2 Present Value and Multiple Cash Flows [LO 1]

Investment X offers to pay you $7,100 per year for 9 years, whereas Investment Y offers to pay you $9,700 per year for 5 years.

Requirement 1:

(a)	If the discount rate is 8 percent, what is the present value of these cash flows? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Present value
Investment X	$
Investment Y	$

(b)	Which of these cash flow streams has the higher present value at 8 percent?
	(Click to select)Investment XInvestment Y

Requirement 2:

(a)	If the discount rate is 20 percent, what is the present value of these cash flows? (Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

	Present value
Investment X	$
Investment Y	$

(b)	Which of these cash flow streams has the higher present value at 20 percent?
	(Click to select)Investment YInvestment X

Problem 5-4 Calculating Annuity Present Values [LO 1]

An investment offers $8,600 per year for 17 years, with the first payment occurring 1 year from now. Assume the required return is 9 percent.

Requirement 1:

What is the value of the investment today? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Requirement 2:

What would the value be if the payments occurred for 42 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Requirement 3:

What would the value be if the payments occurred for 77 years? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Requirement 4:

What would the value be if the payments occurred forever? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Present value

$

Problem 5-11 Calculating Perpetuity Values [LO 1]

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