TimeValue Analysis

TimeValue Analysis

Qn.9.1

a).

Anopportunity cost rate is the value of a product that shall beneglected to tackle certain issues. The advantages could be achievedby looking at the quality of products. It is also thedifference in return between a selected business and the need to passup. For example you put money in goods of the business and itacquires a paltry 4 percent in a given year. In investing your moneyin the stock, you gave up the opportunity of another investment. Forexample, a risk-free government bond yielding 8%. In this situation,your opportunity costs are 4 percent (8% – 4%).

b).

Inmost cases organizations only concentrate on assets that can realizeone payment in a year after them being purchased and which followsystematic risk solving from the economy with no excess probabilityfrom tossing a coin to put same cost which mean nothing

c).

No.!The opportunity cost rate is never a single number. It variesaccording to the situation and the cost of the securities being putacross.

Qn.9.4

a).

Whereas, (1) is constant and ( r ) is the discounted percentages.

__Thereforethe present value =$36.3636__

b).the future value = present value x (1 + r)^{n}

whereas, (1) is constant,(n) is the number of years and (r) is the requiredrate of return.

Futurevalue = $400 x (1 + 10%)^{10}

Futurevalue =$400 x 111

__Futurevalue = $44400__

c).

Thepresent value for five years

__Presentvalue =0.7835261664__

d).

Thefuture value for five years

Thefuture value = present value x (1 + r)^{n}

Futurevalue = 200 x (1 + 5%)^{5}

Futurevalue =200 x 1.2762815625

Therefore,future value =255.2563125

Qn.9.6.

a).

++

++

Presentvalue =$227.27 + 330.57851 + 375.6574 +409.8080732 +372.55510

__Presentvalue =1715.8690832__

b).

__Thereforethe present value = 0 (zero)__

Qn,9.7

a),

__Thereforethe present value = 0 (zero__)

b).the future value = present value x (1 + r)^{n}

Futurevalue= 4000 x (1 +10%)^{5}

Futurevalue = 4000 x 1.6105=__$6442__

c).

++ ++

++ ++

Presentvalue =181.8182 + 0 + 1126.9722 + 1707.5336 + 248.3701

__Presentvalue =$3264.6941__

d).

Itinvolves discounting factors

Qn.9.9

Whereas1 is constant, r is the r the required rate of return and n is theperiod or the number of years by which the money is to be paid.

Therefore,cash flow=$1.75

Therate = 6 %

Theperiod = 20 years

Therefore,