## CHECK THESE SAMPLES OF Explain how an investor can set a stream of future payments from an investment equal to its present value. Give two reasons why an investor might be interested in the present value

...?Part A. PV=FV i)t PV=15,000 0.07 PV=$14,019 PV=FV i) t PV=15,000 0.04 PV=$14,423 B. Account A PV=6,500 0.06 PV=$6,132 Account B PV=12,600/ (1+0.06)2 PV=$11,214 C. At 7% discount rate At 5% discount rate PV = $ 175,421,661 At 3% discount rate PV = $182,858,207 The **present** **value** of the income **stream** is the lowest at 7% discount rate and the highest at 3% discount rate. This is because at a high discount rate the income due in the **future** is worth very little today and at a relatively low discount rate the income due in the **future** is worth relatively more. Part 2 In my opinion the Interstate Travel Centre business will be the riskiest of all the business...

4 Pages(1000 words)Essay

...goes inversely, it will fall. This would cause me to choose a higher RRR. This in turn, will cause the discount factor in the formula to increase, which would then cause the **present** **value** to decline. Thus, the prices I would charge currently will be lower that the previous case.
D. If the inflation or **interest** rate rises in the market, it would cause me to choose a higher rate of return because of the increased risk. In other words, keeping the risk-free rate constant, my risk premium that I demand for a particular **investment** would rise. Since in this case, the goldmine is located in a third world country, my choice would be to charge a higher price in the wake of...

3 Pages(750 words)Essay

...2057.1936
4 (sale of building) 1300 1 21613.746
Less initial cash outlay (I0) (6000)
[300 + 1900 + 2000 + 18000
Net **Present** **Value** 16913.746
NPV of the project = 13.746 X 1000 = 16,913.746
CALCULATIONS **EXPLAINED**
1. To get the **present** **value** of **future** cash flows, we discount them using a suitable discounting rate. In this case it has been given as 9%. The annuity tables **give** a factor within a certain **interest** rate .This factor is then multiplied by the cash flows to obtain their **present** **values**. It is this factor that is referred to as the...

6 Pages(1500 words)Essay

...to £11400. These profits represent cash inflows for each year as depreciation on equipment has not been considered for calculation of such profits. These cash flows have been discounted at the rate of 20% (PVIF table multipliers for each year) in order to calculate the **present** **value** of cash inflows from the project. The total **present** **value** of cash in flows from the project comes to £40233. As the cash outflow is £40000, the net **present** **value** come to £233. Thus using NPV method of appraisal, the project is viable.
Business is full of uncertainties. Uncertainty means more things **can** happen than will happen. That means each...

5 Pages(1250 words)Essay

...Exercise The Net **Present** **Value** (NPV) Model a) Year Cash flow PVIF 10%, n **Present** **value** -50,000 50,000 12,000 0.909 10,908 16,000 0.826
13,216
2014
20,000
0.751
15,020
2015
24,000
0.683
16,392
2016
28,000
0.621
17,388
NPV
22,924
i) This is a worthwhile **investment** to venture into since it results in a positive NPV. Therefore, the **present** **value** of the cash flows expected is more than the **present** **value** of the initial cash outlay incurred at the beginning.
ii) Due to time **value** of money, the **value** of money now would be much less in one year since money loses **value** as time passes. This means that it is prudent for an **investor** to consider the **present** **value** of the expected net returns and compare this with the **present** **value** of the initial... ...

6 Pages(1500 words)Assignment

...would have to pay more for the gold **stream** when the **interest** rate is low, at 3% and they will pay less when the **interest** rate is more, at 7%. Therefore, for one to receive the three **payments** in **future**, one has to pay more when the **interest** rate is less and pay much when the **interest** rate in more.
Part II
Looking at the three projects, the Real Estate Brokerage is the project with the highest risk. For one **reason**, it is requires a high capital to start, and as it is known to us, the businesses that require much capital to start also are associated with the highest risks. The monthly profits of this...

3 Pages(750 words)Assignment

...The concept of net **present** **value** is an analytic tool that **can** help both corporations and novice **investors**. From an **investor** standpoint the use of netpresent **value** is very useful because net **present** **value** takes into consideration the time **value** of money. Due to inflation money depreciates over time. A person has $100 saved up in a cookie jar and leaves it there for five years will lose money because those $100 will not have the same purchasing power five years into the **future**. Using the net **present** **value** table **can** help a...

1 Pages(250 words)Essay

...the inverse relationship between security prices and **interest** rates, the security to be considered will be a bond. Bonds are usually bought directly through banks or mutual funds. Upon issuance of new bonds, they carry coupon rates that are either **equal** or close to the prevailing market **interest** rate. However, security prices in general and in this case bond prices have an inverse relationship with **interest** rates. This implies that once the **interest** rate goes down in an individual economy, the **value** of securities goes up. The reverse is also true. As such, **investors** in various securities should have a keen eye on...

2 Pages(500 words)Coursework

... Net **Present** **Value** Learner’s Affiliated institute Net **Present** **Value** Initial **investment** 600,000 Duration = 5 years Rate = 10%
Cash flow:
Year 1: $380,000
Year 2: $390,000
Year 3: $400,000
Year 4: $410,000
Year 5: $420,000
Net **Present** **Value**: -$1,598,490.88
PV of Expected Cash Flows: $1,509.12
Discussion
At a rate of 10.00% and for a period of 5 years, the projected cash flows are worth $1,509.12 today, which is less than the initial $1,600,000.00. The NPV of the project is -$1,598,490.88, which implies that, the project is not likely to receive the expected return at the end of the project. For this **reason**, pursuing this project may not be an optimal decision.
However, despite the fact that, the projected capital project resulted... in a...

1 Pages(250 words)Coursework