Computing the Present value

Discount Rate 10%

Formula PV=FV/(1+I)^N

Year Cash Flow Present Value PV.Function

1 100 90.9090909090909 ($90.91)
2 100 82.6446280991735 ($82.64)
3 100 75.1314800901578 ($75.13)
4 100 68.3013455365071 ($68.30)
5 100 62.0921323059155 ($62.09)

Net present value

Summing-up cell 379.0786769
Using execl NPV function $379.08 $379.08
Using excel's PV function ($90.91)
unction
0.91)
2.64)
5.13)
8.30)
2.09)
 Numerical Problems
Future value of a single amount using Formula
Bank A = 10,000 x {1.04}^ 3 = 11248.64 ($11,248.64) Rate 4%
Bank B = 10,000 x{ 1.02}^6 = 11261.62 years 3
Bank C = 10,000 x {1.01}^12 =11268.25 P.V 10000
So, Bank A interests: 11,248.64-10,000=$1,248.64 Rate 4/2 2%
Bank B interests: 11,261.62-10,000=$1,261.62 ($11,261.62) years 6
Bank C interests: 11,268.25-10,000=$1,268.25 P.V 10000
F.V=PV{1+i}^n Rate 4/4 1%
($11,268.25) Months 12
P.V 10000
using Formula
Bank A

Bank B

Bank C
 Computing the Future values
Discount Rate 15%
Formula FVA Due = P * [(1 + i)n – 1] * (1 + i) / i FVA Ordinary = P * [(1 + i)n – 1] / i

Year Cash Flow Annuity D.Future Value Annuity

6 9000 ($90,601.19)
Cash Flow Ordinary A. FV.ordinary Annuity
10000 ($87,537.38)

Computing the Present values

Discount Rate 15%
Formula Present Value Ordinary A.=FV {1/(1+i)^N} PV.A =FV {1- [1/(1+i)^N/i]}

Year Cash Flow Annuity D.Present Value Annuity

6 9000 ($39,169.40)
Cash Flow Ordinary A. PVA.
10000 ($37,844.83)

Using formula PV=FV {1/(1+i)^N} Ordinary Annuity

PV=10000{1/(1+0.15)^6}
PV=10000{1/(1.15)^6}
PV=10000{1/(2.3130)}
PV=10000{0.4323}
PV=4323

Using Table PV.A= A*(PVIFA i n) Annuity Due

PV.A=9000*(0.432)
PV.A=3888
Present Value of Annuity Due = $9000 * [1 – (1 + (15%/1))-6*1] * [(1 + (15%/1))

PVA Due =* [1 – (1 + r/n)-t*n] * [(1 + r/n) / (r/n)]

an does annuity X. Of course, the fact that X is an annuity due means that the $9,000 would be received at the beginning each year, unlike
P * [(1 + i)n – 1] / i

Part B

[1/(1+i)^N/i]} Part C

Ordinary Annuity Y

Annuity Due X

(1 + (15%/1))
Computing the Present values
Discount Rate 5%
Formula Present Value O.Annuity =FV {1/(1+i)^N}

Year Cash Flow Annuity D.Present Value Annuity$1,409,394 So PV of Future Cash payments at $1,4
25 100000 ($1,409,394.46)

Present Value O. Annuity =FV {1/(1+i)^N}

($1,409,394.46)
Future Cash payments at $1,409,394 is higher than $1,300,000 which she is being offered now. SO she should take the 2nd option.
d take the 2nd option.
 Computing the Present values
Discount Rate 12% Using Formula
Formula Present Value O.Annuity =FV*(1+i)^N a.
The $6000 is the future value, the unkn
Year Cash Flow Annuity D.Present Value Annuity PV=FV*(1+r)^-N
Annual 6 6000 ($3,039.79) PV=$6000*(1+12%)^-6
PV=$3,039.79
Semiannua 12 Present Value O. Annuity =FV {1/(1+i)^-N} b.
$3,039.79 PV=$6000*(1+12%)^-12
PV=$ 1540.050
Quarterly 24 c.
PV=$6000*(1+12%)^-24
    =$395.292

d.Annual interest is the same as discount rate because discounting an amount means stating in today's terms,which als
0 is the future value, the unknown is present value.

0*(1+12%)^-6

Formula
0*(1+12%)^-12 ($1,540.05)

0*(1+12%)^-24 ($395.29)

ting in today's terms,which also applies to the amount to be invested when the future cash flow repayable is known, the amount to be inv
s known, the amount to be invested can be brought back to equivalent amount today by discounting.