Present Value of Investment
Mr. X won a lottery, and he was given two payment scheme: Scheme A, where he had choice of receiving $4.7 million now or Scheme B, where he received a monthly payment of $34,000 for the next 36 month. For his investment, Mr. X demanded at least 13% per annum (after tax). What is the present value of his money using scheme B?
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Charlie, who is just 16 years old, won a lottery. However, the lottery does not pay out money until a person is at least...
Charlie, who is just 16 years old, won a lottery. However, the lottery does not pay out money until a person is at least 25 years old. Charlie hires a financial consultant and this consultant suggests that Charlie invest the money and then begin receiving monthly payments of 2500$ once he reaches age 25. The consultant also suggests that Charlie should protect himself from inflation by having his payments increase by 2.3% each year. Thus, the 12 monthly payments in...
Charlie, who is just 16 years old, won a lottery. However, the lottery does not pay...
Charlie, who is just 16 years old, won a lottery. However, the lottery does not pay out money until a person is at least 25 years old. Charlie hires a financial consultant and this consultant suggests that Charlie invest the money and then begin receiving monthly payments of 2500$ once he reaches age 25. The consultant also suggests that Charlie should protect himself from inflation by having his payments increase by 2.3% each year. Thus, the 12 monthly payments in...
O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. If...
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O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. If...
O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. If O'Reilly wins the jackpot, he has a choice of receiving $200 million in five years or a smaller lump sum now. Advise O'Reilly on his choice under the following scenarios. Which option should he take and why? Use Exhibit 31. a. O'Reilly's after-tax return is 10 percent. If he chooses the current lump-sum option, the lottery will pay him $130 million b. O'Reilly's after-tax...
Exercise 12A-6 Basic Present Value Concepts [LO12-7) The Caldwell Herald newspaper reported the following story: Fr...
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Question 1 (35 marks) Sam, age 32, owns and runs a dessert shop in Shatin. He...
Question 1 (35 marks) Sam, age 32, owns and runs a dessert shop in Shatin. He has just received a notification that he has won the first prize in the Bloom Lottery that gives significant changes on his life goals. He knows that you are a financial analyst in a local bank. He calls you for financial advice on making the following financial decisions. Question 1 (cont.) (c) Once Sam received the prize, he will rent out his shop for...
Please show formula to find the answer 1) You have just won the lottery. At the...
Please show formula to find the answer
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9. Present value of annuities and annuity payments Aa Aa The present value of an annuity...
9. Present value of annuities and annuity payments Aa Aa The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. O An annuity that pays $500 at the beginning of every six months O An annuity that pays $500 at the...
The present value of an annuity is the sum of the discounted value of all future...
The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. bevinning of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year An annuity that pays...
(d) Sam is planning to arrange a tailor-made bank deposit investment plan that can generate a...
(d) Sam is planning to arrange a tailor-made bank deposit investment plan that can generate a regular annual interest income of $35,000, starting with the first payment received 6 years from now and the last payment received 15 years from now. Calculate the present value of this annuity amount at Year 3, given the relevant discount rate is 12% per annum. (e) If Sam is attracted by another investment compounded quarterly that grow 50% in 4 years, calculate the annual...
O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. If O'Reilly wins the jackpot, he has a choice of receiving $200 million in five years or a smaller lump sum now. Advise O'Reilly on his choice under the following scenarios. Which option should he take and why? Use Exhibit 31. a. O'Reilly's after-tax return is 10 percent. If he chooses the current lump-sum option, the lottery will pay him $130 million b. O'Reilly's after-tax...
O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. If O'Reilly wins the jackpot, he has a choice of receiving $200 million in five years or a smaller lump sum now. Advise O'Reilly on his choice under the following scenarios. Which option should he take and why? Use Exhibit 31. a. O'Reilly's after-tax return is 10 percent. If he chooses the current lump-sum option, the lottery will pay him $130 million b. O'Reilly's after-tax...
Exercise 12A-6 Basic Present Value Concepts [LO12-7) The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state's newest millionaire. By choosing the six winning numbers on last week's state lottery, Mr. Ormsby won the week's grand prize totaling $1.04 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $52,000 each. Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using...
Question 1 (35 marks) Sam, age 32, owns and runs a dessert shop in Shatin. He has just received a notification that he has won the first prize in the Bloom Lottery that gives significant changes on his life goals. He knows that you are a financial analyst in a local bank. He calls you for financial advice on making the following financial decisions. Question 1 (cont.) (c) Once Sam received the prize, he will rent out his shop for...
Please show formula to find the answer
1) You have just won the lottery. At the end of each of the next 20 years, you will receive a payment of $50,000. If the cost of capital is 10 percent per year, what is the present value of your lottery winnings? 50,000 Cost of Capital Payment Term Rate 20 10% 0 2) A perpetuity is an annuity that is received forever. If I rent my house and at the beginning of...
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The present value of an annuity is the sum of the discounted value of all future cash flows. You have the opportunity to invest in several annuities. Which of the following 10-year annuities has the greatest present value (PV)? Assume that all annuities earn the same positive interest rate. bevinning of each year An annuity that pays $500 at the end of every six months An annuity that pays $1,000 at the beginning of each year An annuity that pays...
(d) Sam is planning to arrange a tailor-made bank deposit investment plan that can generate a regular annual interest income of $35,000, starting with the first payment received 6 years from now and the last payment received 15 years from now. Calculate the present value of this annuity amount at Year 3, given the relevant discount rate is 12% per annum. (e) If Sam is attracted by another investment compounded quarterly that grow 50% in 4 years, calculate the annual...
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