Payment using actual and constant dollar analysis

Assignment Help Financial Management

Reference no: EM131318821

A company of $20,000 is to be received 10 years hence, followed by a $40,000 payment 17 years from the present. If over this time span the annual inflation rate is 5% while the expected annual market rate is 9%, calculate the present equivalent these two payment using

a. Actual – dollar analysis

b. Constant – dollar analysis

Reference no: EM131318821

Questions Cloud

Interest rate properly reflects the time value of money : A new machine with an expected useful life of 4 years is expected to generate annual net cash flows of $15,000. What are the (rounded) cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?

Evaluating two different silicon wafer milling machines : You are evaluating two different silicon wafer milling machines. The Techron I costs $261,000, has a three-year life, and has pretax operating costs of $70,000 per year. The Techron II costs $455,000, has a five-year life, and has pretax operating co..

Calculate eac for both conveyor belt systems : Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $264,000, has a four-year life, and requires $81,000 in pretax annual operating costs. Calculate the EAC for both conveyor belt sys..

Postal service for the next five years : Consider a project to supply 105 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,950,000 five years ago; if the land were sold today, it would net you $2,150,0..

Payment using actual and constant dollar analysis : A company of $20,000 is to be received 10 years hence, followed by a $40,000 payment 17 years from the present. If over this time span the annual inflation rate is 5% while the expected annual market rate is 9%, calculate the present equivalent these..

There are two risky assets in the financial market : There are two risky assets in the financial market. If an investor decides to invest 40% into A and correlation coefficient between A and B is .4, compute the expected return and standard deviation for the risky portfolio.

Which would you take based on the time value of money : If I were to offer you $5,000 today or $10,000 10 years from now, which would you take based on the time value of money?

An aggressive common stock fund : You start a new job. They give you a variety of investments for your 401K plan. You have 4 choices A money market fund that historically has returned 2.5% per year A long term bond fund with an average annual return of 6% A conservative common stock ..

The growth rate in dividends is expected to be constant : Shark Inc. just paid a dividend of $3.65 on its stock. The growth rate in dividends is expected to be a constant 7 percent per year indefinitely. Investors require a return of 15 percent for the first three years, a return of 13 percent for the next ..

User Account

All Pages