1). What is the present value of the following annuity? $3,916 every half year at the beginning of the period for the

Question

1). What is the present value of the following annuity? $3,916 every half year at the beginning of the period for the next 11 years, discounted back to the present at 9.12 percent per year, compounded semiannually. (Round the answer to two decimal places.) 2). What is the future value in 29 years of an ordinary annuity cash flow of $963 every quarter of a year a the end of the period, at an annual rate of 7.06 percent per year, compounded quarterly? (Round tithe answer to two decimal places) 3). Cooling Tools, Inc. is currently producing 624 of small refrigerators per month but the company's CEO plans to increase production at a rate of 9.27 percent per month until the firm is producing 7,245 of refrigerators per month. How many months will this take? (Round the answer two two decimal places)

Help In Homework · Accepted Answer

1). We can calculate the present value by using the following formula in excel:- =-pv(rate,nper,pmt,fv,type) Here, PV = Present value Rate = 9.12%/2 = 4.51% (semiannual) Nper = 11*2 = 22 periods (semiannual) Pmt = $3,916 FV = $0 Type = 1 Substituting the values in formula: = -pv(4.51%,22,3916,0,1) = $56,361.67 2). Computation of the future value of ordinary annuity:- FV of ordinary annuity = Cash flows*((1+rate)^n-1)/rate Here, n = 29*4 = 116 periods (quarterly) Rate = 7.06%/4 = 1.765% (quarterly) FV of ordinary annuity = $963*((1+1.765%)^116-1)/1.765% = $963*374.5380 = $360,680.13 3). We can calculate the number of months by using the following formula in excel:- =nper(rate,pmt,-pv,fv) Here, Nper = Number of month Rate = 9.27% Pmt = 0 PV = 624 FV = 7,245 Substituting the values in formula: = nper(9.27%,0,-624,7245) = 27.66 months

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