P5 – 10 Present value calculation Without referring to the preprogrammed function on your financial calculator , use the basic formula for present value , along with the given opportunity cost , r , and the number of periods , n , to calculate the present value of $ 1 in each of the cases shown in the following table .
Case Opportunity cost , r Number of periods , n A 2 % 4 B 10 2 C 5 3 D 13 2
P5 – 17 Cash flow investment decision Tom Alexander has an opportunity to purchase any of the investments shown in the following table . The purchase price , the amount of the single cash inflow , and its year of receipt are given for each investment . Which purchase recommendations would you make , assuming that Tom can earn 10 % on his investments ?
Investment Price Single cash inflow Year of receipt A $ 18,000 $ 30,000 5 B 600 3,000 20 C 3,500 10,000 10 D 1,000 15,000 40
P5 – 21 Time value : Annuities Marian Kirk wishes to select the better of two 10-year annuities , C and D . Annuity C is an ordinary annuity of $ 2,500 per year for 10 years . Annuity D is an annuity due of $ 2,200 per year for 10 years .
a . Find the future value of both annuities at the end of year 10 assuming that Marian can earn ( 1 ) 10 % annual interest and ( 2 ) 20 % annual interest .