Question

Calculating Annuity Present Value: An investment offers $5500 per year for 15 years, with the first...

Calculating Annuity Present Value: An investment offers $5500 per year for 15 years, with the first payment occurring one year from now. If the required return is 7.5%, what is the value of the investment? What would the value be if the payments occurred for 40 years? 75 years? Forever?

0 0
Add a comment Improve this question Transcribed image text
Answer #1

PV of annuity = P(1-((1+r)^-n))/r

r

0.075

n

15

P

$5500

PV

?

Where r is the rate and n is the number of period. P is the payment per period

Substituting values we have:

Present Value=5500*(1-((1+0.075)^-15))/0.075

=$48,549.16

For 40 years:

Present Value=5500*(1-((1+0.075)^-40))/0.075
$69,269.25

For 75 years:

Present Value=5500*(1-((1+0.075)^-75))/0.075

$73,009.99

For forever we need present value of perpetuity:

PV perpetuity=Cash flow/rate
=$5,500/0.075

=$73,333.33

Add a comment
Know the answer?
Add Answer to:
Calculating Annuity Present Value: An investment offers $5500 per year for 15 years, with the first...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Calculating Value and Multiple Cash Flows: Investment X offers to pay you $4850 per year for...

    Calculating Value and Multiple Cash Flows: Investment X offers to pay you $4850 per year for nine years, whereas Investment Y offers to pay you $6775 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5%? If the discount rate is 21%? Calculating Annuity Present Value: An investment offers $5500 per year for 15 years, with the first payment occurring one year from now. If the required return...

  • Problem 6-4 Calculating Annuity Present Value [LO1] An investment offers $6,400 per year for 15 years,...

    Problem 6-4 Calculating Annuity Present Value [LO1] An investment offers $6,400 per year for 15 years, with the first payment occurring on year from now. If the required return is 6 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g. 32.16.) Present value What would the value be if the payments occurred for 40 years? (Do intermediate calculations and round your final answer to 2 decimal...

  • value: 1.00 points Problem 5-4 Calculating Annuity Present Values [LO An investment offers $7,600 per year...

    value: 1.00 points Problem 5-4 Calculating Annuity Present Values [LO An investment offers $7,600 per year for 16 years, with the first payment occurring one year from now. Assume the required return is 9 percent. What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value What would the value be if the payments occurred for 41 years? (Do not round intermediate calculations and round your...

  • An investment offers $4,350 per year for 15 years, with the first payment occurring one year...

    An investment offers $4,350 per year for 15 years, with the first payment occurring one year from now. a. If the required return is 6 percent, what is the value of the investment? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value be if the payments occurred for 40 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What would the...

  • plz show process 5.1 An Investment offers $10,000 per year for 15 years, with the first...

    plz show process 5.1 An Investment offers $10,000 per year for 15 years, with the first payment occurring 1 year from now. If the require retum is 7.5 percent. a. What is the value of the investment? (3%) b. What would the value be if the payments occurred for 30 year? (2%) c. For 60 year? (2%) d. Forever? (3%)

  • An investment offers $5,000 per year for 10 years, with the first payment occurring 1 year...

    An investment offers $5,000 per year for 10 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred forever?

  • An investment offers $10,300 per year for 14 years, with the first payment occurring one year...

    An investment offers $10,300 per year for 14 years, with the first payment occurring one year from now. Assume the required return is 11 percent. What is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 32.16.) Present value What would the value be if the payments occurred for 39 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value What...

  • Present Value and Multiple Cash Flows [LO1] Seaborn Co. has identified an investment project with the...

    Present Value and Multiple Cash Flows [LO1] Seaborn Co. has identified an investment project with the following cash flows. If the discount rate is 1O perent. (Questios what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent? 1. BASIC Questions 1-1 Cash Flow $ 950 1,040 1,130 1,075 Year 2. Present Value and Multiple Cash Flows [LO1] Investment X offers to pay you $6,000 per year for nine years, whereas...

  • An investment offers $6,600 per year for 10 years, with the first payment occurring one year...

    An investment offers $6,600 per year for 10 years, with the first payment occurring one year from now. a. If the required return is 5 percent, what is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would the value today be if the payments occurred for 35 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What...

  • А в c D E F G H E An investment offers $6,100 per year for...

    А в c D E F G H E An investment offers $6,100 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? 6,100 Payment per year # of years Required rate of return # of years # of years Complete the following analysis. Do not...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT