Question

QUESTION 5 A set of cash flows begins at $10,000 the first year, with an increase each year unti na 10 years. If the interest rate is 5% what is the present value when the annual increase is $10,000? 034260-27 QUESTION 6 Congratulations! You've been offered a job with a contract of 4 years. The company is offering to pay you in one of two (A) You can be paid a fiat salary of S72000 each year for the 4 years -OR- (B) You can have a starting salary of 62,000 and get a 4% raise every remaining year To determine which of these offers to take you'll need to compare them "apples to apples - by bringing both cash flows into the present. Assuming an 8% interest rate, determine offer A's present value, rounded to the nearest whole dollar 239404 QUESTION 7 Congratulations! You've been offered a job with a contract of 4 years. The company is offering to pay you in one of two ways (A) You can be paid a fiat salary of 572000 each year for the 4 years - OR (B) You can have a starting salary of 62,000 and get a 4% raise every remaining year This time, still assuming an 8% interest rate, determine offer B's present value founded to the nearest whole dollar

Answer 1

Answer:

Question 5)

annual cash flow F=80000

n=10 years

Increment g=10000

r=5%

So Present Value PV= F*(1-(1+r)^-n)/r + g*{((1+r)^n-1)/(r^2*(1+r)^n) - n/(r*(1+r)^n)}

PV=80000*(1-(1+5%)^-10)/5% + 10000*{((1+5%)^10-1)/(5%^2*(1+5%)^10) -10/(5%*(1+5%)^10)} =$934259.27