Calculate the present value for each of the options

Assignment Help Financial Management

Reference no: EM132032275

As winner of a racing competition, you can choose one of the following prizes:

• Option A: $30,000 to be received at the end of each year for 10 years, the first payment occurring 3 years from now.

• Option B: $250,000 at the end of five years.

• Option C: $16,000 per year forever, the first payment starting one year from now.

• Option D: $10,000 in year 1 and increasing thereafter by 5.5% per year forever.

• Option E: $45,000 per year every year for 4 years with the first payment now.

If the interest rate is 12% per annum compounded annually, calculate the present value (PV) for each of the options above. Show workings.

Reference no: EM132032275

Questions Cloud

Selecting the most efficient portfolio of two shares : An advisor of X ltd has suggested the decision about which shares to buy shoud be based upon selecting the most efficient portfolio of two shares.

What are the components of a comprehensive budget : Personal Finance: What are the components of a comprehensive budget and what is the purpose of each component?

How are primary and secondary markets different : How are primary and secondary markets different? List the names of two secondary markets. What is the goal of the financial manager?

What factor would determine which value you chose to use : Personal Finance Question: What is the present value of CD with 4% annual interest that matures in 1 year with the value of $3000? What is the future value?

Calculate the present value for each of the options : If the interest rate is 12% per annum compounded annually, calculate the present value (PV) for each of the options above.

What is the meaning of the statement in your own life : Personal Finance Question. How is net worth calculated? What is the meaning of the statement that your net worth is the equity you have in your own life?

Expectation to be consistent with the capm : what beta would it need to have for this expectation to be consistent with the CAPM?

Find the present value of the perpetuity using given values : A perpetuity has a payment of 100 at time t = 1. Each subsequent payment is 5 less than the previous payment until the payments reach an amount of 50.

What should be the amount of the payment : A loan company has offered to consolidate (shoulder/pay) these debts now if monthly payments will be made to it over the next 5 years at an interest of 14%.

User Account

All Pages