Homework Answers
Answer : The Discount rate of the associated Cash flows
Present Value is calculated by discounting the Cashflows with using the Discounting rate, PV (Present Value ), PVa (Present Value of Annuity is used to Find out the Present Value of the Debt.
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Which one of the following is needed in order to find the present value of an...
VICTONE e TV owing is needed in order to find the present Value UI alongaLION The...
VICTONE e TV owing is needed in order to find the present Value UI alongaLION The discount rate of the associated cash flows All debt covenants that are a component of the obligation The gross profit rate of the borrower The rate of inflation during the year Question 2 How is interest expense calculated according to GAAP? Stated rate of interest x maturity value. Effective interest ratex maturity value. Effective interest ratex book value. Stated rate of interest x book...
Which of the following is not needed to compute the present value of an investment? A....
Which of the following is not needed to compute the present value of an investment? A. The length of time between the investment and future receipt B. The amount of the receipt C. The interest rate D. The rate of inflation
Using the appropriate present value table and assuming a 2% annual market interest rate, determine the...
Using the appropriate present value table and assuming a 2% annual market interest rate, determine the present value, of a 3 year note with the face value of $5,000, and stated interest rate of 4%, with annual interest payments. Your firm agrees to the lend money to your supplier at the present value of the above note receivable. Write down the journal entries to record the initiation of such a loan at the calculated present value. Step 1: determine the...
Part Two Net Present Value Method Net present value (NPV) is one method that can be...
Part Two Net Present Value Method Net present value (NPV) is one method that can be used to evaluate the fihancial viability of potential projects. It determines the present value of all future cash flows associated with potential projects and measures this against the cost of the project. To use net present value, a required rate of return must be defined. The required rate of return is the minimum acceptable rate of return that an investment must yield for it...
Please answer K and L i. What is the present value of the following uneven cash...
Please answer K and L
i. What is the present value of the following uneven cash flow stream? The annual interest rate is 496. 04% 100 $300 $300 $50 j. 1. Wll the future value be larger or smaller is we compound an initial amount more often than annually (e-g., semiannually, holding the stated (nominal) rate constant)? Why? 2. Define a. the stated (or quoted or nominal) rate b. the periodic rate C, the effective annual rate (EAR or EFF%)...
If the process of coming back to present value (PV) from future cash flows is called...
If the process of coming back to present value (PV) from future cash flows is called discounting, then the process of going to future value (FV) from present value (PV) is called compounding. (TRUE/FALSE)?_______________________ For a corporate bond, the quoted interest rate minus the real risk-free rate is equal to which of the following? Nominal interest rate Real inflation rate plus nominal interest rate Market risk premium The sum of inflation premium, default risk premium, liquidity premium and maturity risk premium
15. Which of the following is CORRECT about the arbitrage-free price of a coupon bond? The...
15. Which of the following is CORRECT about the arbitrage-free price of a coupon bond? The sum arbitrage-free price of a coupon bond. The coupon of the present value of all cash flows (discounted at the required yield) is the A. B. C. The the present value of all cash flows (discounted at the spot rate of the bond's final term to maturity) is the arbitrage-free price of a coupon bond. of the present value of all cash flows (discounted...
losest to: net rate of interest is 8%, then the present value (PV) of this stream...
losest to: net rate of interest is 8%, then the present value (PV) of this stream of cash flows $1677 and 11: You are given two choices of investments, Investment A and Investment B. Both investments have the same future cash flows. Investment A has a discount rate of 4%, and Investment B has a discount rate of 5%. Which of the following is true? O A. The present value of cash flows in Investment A is equal to the...
Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table....
Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table. Cash flow stream Year $50,000 $10,000 20,000 30,000 30,000 20,00040,000 -50,000 Totals $50,000 $50,000 0 40,000 4 10,000 a. Find the present value of each stream using a 5% discount rate. b. Compare the calculated present values and discuss them in light of the undis- flows totaling $50,000 in each case. Is there some discount rate at counted cash which the present values of...
Mastery Problem: Net Present Value and Internal Rate of Return Part One Companies use capital investment...
Mastery Problem: Net Present Value and Internal Rate of Return Part One Companies use capital investment analysis to evaluate long-term investments. Capital investment evaluation methods that use present values are (1) Net present value method (NPV) and (2) Internal rate of return (IRR) method. Methods That Use Present Values Of the two capital investment evaluation methods, a defining characteristic NPV and IRR is that they consider the time value of money. This means that money tomorrow is worth less than money today....
VICTONE e TV owing is needed in order to find the present Value UI alongaLION The discount rate of the associated cash flows All debt covenants that are a component of the obligation The gross profit rate of the borrower The rate of inflation during the year Question 2 How is interest expense calculated according to GAAP? Stated rate of interest x maturity value. Effective interest ratex maturity value. Effective interest ratex book value. Stated rate of interest x book...
Part Two Net Present Value Method Net present value (NPV) is one method that can be used to evaluate the fihancial viability of potential projects. It determines the present value of all future cash flows associated with potential projects and measures this against the cost of the project. To use net present value, a required rate of return must be defined. The required rate of return is the minimum acceptable rate of return that an investment must yield for it...
Please answer K and L
i. What is the present value of the following uneven cash flow stream? The annual interest rate is 496. 04% 100 $300 $300 $50 j. 1. Wll the future value be larger or smaller is we compound an initial amount more often than annually (e-g., semiannually, holding the stated (nominal) rate constant)? Why? 2. Define a. the stated (or quoted or nominal) rate b. the periodic rate C, the effective annual rate (EAR or EFF%)...
15. Which of the following is CORRECT about the arbitrage-free price of a coupon bond? The sum arbitrage-free price of a coupon bond. The coupon of the present value of all cash flows (discounted at the required yield) is the A. B. C. The the present value of all cash flows (discounted at the spot rate of the bond's final term to maturity) is the arbitrage-free price of a coupon bond. of the present value of all cash flows (discounted...
losest to: net rate of interest is 8%, then the present value (PV) of this stream of cash flows $1677 and 11: You are given two choices of investments, Investment A and Investment B. Both investments have the same future cash flows. Investment A has a discount rate of 4%, and Investment B has a discount rate of 5%. Which of the following is true? O A. The present value of cash flows in Investment A is equal to the...
Present value: Mixed streams Consider the mixed streams of cash flows shown in the following table. Cash flow stream Year $50,000 $10,000 20,000 30,000 30,000 20,00040,000 -50,000 Totals $50,000 $50,000 0 40,000 4 10,000 a. Find the present value of each stream using a 5% discount rate. b. Compare the calculated present values and discuss them in light of the undis- flows totaling $50,000 in each case. Is there some discount rate at counted cash which the present values of...
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