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Chapter 4: Question: (page 281)
What is the present value of
b. $16,600 in 5 years at 9 percent?
Answer
The present value is $10,788.86
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What are the basic benefits and purposes of developing pro forma statements and a cash budget?
Question: You will receive $6,800 three years from now. The discount rate is 10 percent. c. What is the value of your investment today? Multiply your answer to part b by (1/1.10).
Question: You will receive \(6,800 three years from now. The discount rate is 10 percent. d. Use the formula PV 5 FV 3 _____ 1 (1 1 i) n to find the present value of \)6,600 received three years from now at 10 percent interest.
North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $6 per share. With the passage of time, yields have soared from the original 6 percent to 14 percent (yield is the same as required rate of return).
a. What was the original issue price?
b. What is the current value of this preferred stock?
c. If the yield on the Standard & Poor’s Preferred Stock Index declines, how will the price of the preferred stock be affected?
Rita Gonzales won the \(41 million lottery. She is to receive \)1.5 million a year for the next 19 years plus an additional lump sum payment of $12.5 million after 19 years. The discount rate is 14 percent. What is the current value of her winnings?
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