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Problem 2.01 (i.e. Day 2, Problem 01). PART A: Draw the following cash flow timeline. Specify all times in YEARS. Label everything. Make it bold and beautiful. FYI: Youll be computing the present value of each cash flow using a discount rate of 7%-so leave yourself some room to do the math 1. You receive $175 in 3 years 2. You receive $100 in 4 years and 2 months. 3. You receive $350 at the end of year 5 4. You receive $225 at the beginning of year 18 5. You receive $35 at the beginning of the 3d decade-from now. o 6. You receive $173 at the beginning of the 1 decade-from now.Od 7. You receive $150 in 32 months 8. You receive $1800 at time: 41 - with time measured in years. 9. You receive $100,000 in the middle of the 2nd century-from now. Part B: Using an annual discount rate of 7%, compute the overall (total) present value of the cash flows as described in the 1, 3rd, sth, 7h, and 9th lines (bullet-points) above. Enter your value, without a dollar sign, as a single value (the sum of the five cash flows) in Polylearn. 51 Part C: Repeat Part B, but now find the present value (of the 1, 3rd, 5th, 7th, and 9th cash flows) using a discount rate of 0%. hint-hint.. the answer can be obtained very quickly! ).
Part D: Using a discount rate of 7% per year, what is getting $100,000 in the middle of the 2nd century worth today ? (Enter the value into Polylearn-with, as always, at least 5 digits of precision). For discussion: Does that seem right? If it is right, then what might you expect a large pizza to cost at that time? (Assume that a pizza costs $20 today, and assume that the price of the pizza grows at 7% per year). If instead, the price of the pizza grows at only 2.8% per year, what do you expect a pizza to sell for in 150 years? Part E: Using a discount rate first four lines above . added together as one value (ie find the future value of cash flows #1, #2, #3, #4 collectively). Enter this single value into Polylearn. of 7%, find the overall future value (10vearsfromtoday) of the cash flows in the
Part a - e
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Answer #1

To calculate Present Value (PV), we have used Present Value factor (PVF) by converting months in the form of years.

To calculate Future Value (FV), we have used Future Value Factor (FVF) by using no. of years remaining till maturity i.e. 10 years from now in our case.

Please find screenshot of excel sheet (with formula view) for your kind reference.

File Home Insert Page Layout﹁ Formulas Data Review View Developer Nitro Pro 5 EX シTrace Precedents Show Formulas 嚃Trace Dependents ◆Error Checking . Remove Arrows Evaluate Formula Define Name· calculate Now | ruse in Formula- Insert Autosum Recently Financial Logical Text Date & Lookup & Math More Used - Time- Reterence - & Trig - FunctionsManager ECreate from SelectionRemove Arrows-Evaluate Formula Windo Options Window | Options Function Library Defined Names Formula Auditing Calculation 010 Part Year Month Cash Flow PVF @ 7% PV Total PV 0 2.66666667 17 36 175 50 100 32 492 1800 173 351800 350 1 0.83491691 0.816297877 0.754340791 0.712986179 0.31657439| 0.258419| 0.06241157| 0.00003912311 173 125.237537 142.8521285 75.43407912 249.5451628 71.22923785 9.0446651 112.3408283.912310788 962.5959492 Part B Part Cost of Pizza |FVF@7% |pizza after 1 142.852128 3 249.545163 5 9.0446651 20 25560.34155 511206.831 |Pizza after 13 Cost of Pizza FVF@2.8% 201 62.94586397「 1258.917279 15 16 17 18 19 20 21 93.91231079 Part C Part E Line Cash Flow FVF@7 175 350 281.0117584 148.3902511 350 1.402551731 490.8931057 140.1186919 1060.413807 175 1.605781476 100 1.483902511 225 0.622749742 100000 Overall Future Value 25 H1 | sheet1 . Sheet2 、 Sheet3 Ready !File Home Insert Page Layout﹁ Formulas Data Review View Developer Nitro Pro 5 EX Define Name Calculate Now Use in Formula- 떫 Trace Dependents ◆ Error Checking Insert Autosum Recently Financial Logical Text Date & Lookup & Math More Used - Time- Reterence - & Trig - FunctionsManager ECreate from SelectionRemove Arrows-Evaluate Formula Windo Options ? Create from Selection Remove Arrows Evaluate Formula Window | Options Function Library Defined Names Formula Auditing Calculation 129 -F3/12 -H3/12 13/12 32 150 -12*4+2 17 12 225 20-12 35 -41 12 150 12 175 350 PVF @ 7% /(1.07)AE2 -1/(1.07) G2 -GS G4 1/11.07) H2 -1/107L2 5 14 -KS K4 Part B Cost of Pizza Pizza after 150 years G11 F11 -1.07 150 12 3 Cost of Pizza Pizza after 150 years G14 F14 14 7 15 9 16 Total E6 -1.028 150 D11:D1 Part Future Value -H20 G20 -H21 G21 -H22 G22 -H23 G23 175 75 1.07a(10-F2 07 10-G2 1.07 10-H21 21 3 22 5 23 7 24 9 350 350 | sheeti . Sheet2 , Sheet3 Ready

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