State the example to calculate the present value, Financial Management

Assignment Help:

State the Example to calculate the present value

2, 00,000 $ is the amount which you require after 20 years for your retirement. How much must you invest now at 5% per annum compounded yearly?

Solution

Here i = 0.05, FV = 2, 00,000, and n = 20. Putting it in the formula we get:

Present value = 200000 / (1+0.05)20

Solve this or use present value table.

Using present value interest factor table we find that present value of 1 $ of 20 years from now at 5% interest is 0.3769. Multiplying it with future value 2, 00,000 $ we get:

PV = 2, 00,000 x 0.3769 = 75,380 $

 


Related Discussions:- State the example to calculate the present value

Types of orders prevalent in the us markets, The following are various type...

The following are various types of orders prevalent in the US markets: Market Order : The most common form of order is the market order, which means the order to buy or sell at

Different cost of capital with changed proportions, Different Cost of Capit...

Different Cost of Capital with Changed Proportions: It is quite possible that the specific costs of capital of different sources may be affected by the amount of funds' raised and

Timing of financial reports, Timing of Financial Reports: Just as the a...

Timing of Financial Reports: Just as the actual report requirements differ depending on the requirements of the stakeholder that will be using them, so too will the timing of t

Determine the factors of financial risk by giving example, Determine the fa...

Determine the factors of financial risk by giving example W. T. L. Company's cost of long-term debt two years ago was 8 percent.  This 8 percent was found to represent a 4- per

Definition of financial leverage, Q. Definition of financial leverage? ...

Q. Definition of financial leverage? One of the goals of planning an appropriate capital structure is to maximize the return on equity shareholders fund or else maximize the ea

Explain the factors affecting the choice of a minimum cash, Explain the fac...

Explain the factors affecting the choice of a minimum cash balance amount. The minimum cash balance amount is defined by how easy it is to raise funds when required, how expected

How are the members of the board of directors, How are the members of the b...

How are the members of the board of directors of a corporation chosen and to whom do these board members owe their primary allegiance? The Members of a corporation's board of d

Determine the investment to maximize the return, Assume that the treasurer ...

Assume that the treasurer of a company has an extra cash reserve of $1,000,000 to invest for six months. The six-month interest rate is 8% per year in the U.S. and 6% per year in G

., Identify and explain the key stages in the capital investment decision-m...

Identify and explain the key stages in the capital investment decision-making process and the role of investment appraisal in this process.

Operating cycle, discuss the applicability of an operating cycle to poultry...

discuss the applicability of an operating cycle to poultry business in uganda.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd