Exam 2: How to Calculate Present Values

The value of a five-year annuity is equal to the sum of two perpetuities. One makes its first payment in year 1, and the other makes its first payment in year 6.

If the three-year present value annuity factor is 2.673 and the two-year present value annuity factor is 1.833, what is the present value of $1 received at the end of the three years?

Which of the following is generally considered an example of a perpetuity?

Which of the following statements is true?

What is the net present value of the following cash flow sequence at a discount rate of 11 percent?

If the present value annuity factor at 10 percent for 10 years is 6.1446, what is the equivalent future value annuity factor?

Mr. Hopper expects to retire in 30 years, and he wishes to accumulate $1,000,000 in his retirement fund by that time. If the interest rate is 12 percent per year, how much should Mr. Hopper put into his retirement fund at the end of each year in order to achieve this goal?

An investment having a 10.47 percent effective annual rate (EAR)has what APR? (Assume monthly compounding.)

If the five-year present value annuity factor is 3.60478 and the four-year present value annuity factor is 3.03735, what is the present value of the $1 received at the end of five years?

The present value of $100 expected two years from today at a discount rate of 6 percent is

The rate of return, discount rate, hurdle rate, and opportunity cost of capital all have the same meaning.

What is the present value of a $1,000 per year annuity for five years at an interest rate of 12 percent?

A dollar today is worth more than a dollar tomorrow if the interest rate is positive.

One can find the present value of a future cash flow by dividing it by an appropriate discount factor.

Which of the following statements regarding the NPV rule and the rate of return rule is false?

If the one-year discount factor is 0.8333, what is the discount rate (interest rate)per year?

You just inherited a trust that will pay you $100,000 per year in perpetuity. However, the first payment will not occur for exactly five more years. Assuming an 8 percent annual interest rate, what is the value of this trust?

One can find a project's net present value by subtracting the present value of its required investment from the present value of its future cash flows.

If the present value of $250 expected one year from today is $200, what is the one-year discount rate?

According to the net present value rule, an investment in a project should be made if the: