# Page. 117

Page. 117

7)

FV= PV (1+r)t

Solving for t, we get: t=(FV/PV)/ (1+r)

Double Money

FV= $2$1(1.07)t

T= 2/1.07

T=10.24 Years

Quadruple Money

FV= $4=$1(1.07)t

T=4/1.07

T=20.49 Years

8)

FV= PV(1+r)t

R=(FV/PV)1/t-1

R=(6,450/1)1/116-1

R=7.86%

10)

PV=FV/(1+r)t

PV= 750,000,000/ (1.08)25

PV=$109,513,428.68

15)

FV=PV(1+r)t

R=(FV/PV)1/t-1

R=(10,311,500/12,377,500)1/4-1

R=-.0446 or -4.46%

Page. 153

1)

PV=FV/(1+r)

PV @10%= $950/1.10+$730/1.102+$1,420/1.103+$1,780/1.104=$3,749.57 PV @18%= $950/1.18+$730/1.182+$1,420/1.183+$1,780/1.184=$3,111.72 PV @24%= $950/1.24+$730/1.242+$1,420/1.243+$1,780/1.244=$2,738.56 3)

FV=PV(1+r)t

FV @ 8% = $910(1.08) 3 + $1,140(1.08)2 + $1,360(1.08) + $2,100 = $6,044.83 FV @ 11% = $910(1.11) 3 + $1,140(1.11)2 + $1,360(1.11) + $2,100 = $6,258.74 FV @ 24% = $910(1.24) 3 + $1,140(1.24)2 + $1,360(1.24) + $2,100 = $7,274.29 6)

PVA = C({1-{1/(1 + r)t]}/r)

PVA = $45,000{[1 – (1/1.0825) 9 ]/.0825}

PVA = $278,210.88

The present value of the revenue is greater than the cost, so the company can afford the equipment. 10)

PV = C / r

PV = $35,000 / .06

PV = $583,333.33

12)

EAR = [ 1 + (APR / m)]m-1

EAR = [ 1 + (.08 / 4)]4 – 1 = .0824 or 8.24%

EAR = [ 1 + (.18 / 12)]12 – 1 = .1956 or 19.56%

EAR = [ 1 + (.14 / 365)]365 – 1 = .1502 or 15.02%

EAR = [ 1 + (.10 / 2)]2 – 1 = .1025 or 10.25%

20)

PVA = C({1-{1/(1 + r)t]}/r)

$73,800 = $C[1 – {1 / [1 + (.062/12)]60} / (.062/12)]

C = $73,800 / 51.47757

C = $1,433.63

EAR = [ 1 + (APR / m)]m-1

EAR = [1 + (.062 / 12)]12 – 1

EAR = .0638 or 6.38%

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