Asset	End of Year	Amount

A	1	7,000	8%

2	7,000

3	7,000

B	1 through &inf;	400	5%

C	1	0	6%

2	0

3	0

4	0

5	49,000

D	1 through 5	1,900	4%

6	8,100

E	1	5,000	6%

2	6,000

3	8,000

4	10,000

5	7,000

6	4,000

Valuation of assets   Using the information provided in the following​ table, find the value of each​ asset:

LOADING...

.

Question content area bottom

Part 1

The

value

of Asset A is

​$18,039.68

.

​(Round to the nearest​ cent.)

Part 2

The

value

of Asset B is

​$8,000.00

.

​(Round to the nearest​ cent.)

Part 3

The value of Asset C is

​$36,615.65

.

​(Round to the nearest​ cent.)

Part 4

The value of Asset D is

​$enter your response here

.

​(Round to the nearest​ cent.)

To find the value of Asset D, we need to compute the present value of the cash flows using the given interest rate of 4%. The cash flows for Asset D are as follows:

- From Year 1 to Year 5: $1,900 each year
- In Year 6: $8,100

The formula for the present value of a cash flow $ C $ occurring in year $ t $ with a discount rate $ r $ is:

\[
PV = \frac{C}{(1 + r)^t}
\]

### Steps to Calculate Asset D's Value:

1. **Years 1 through 5**: Each year has a cash flow of $1,900, and we need to discount each cash flow back to the present at a 4% rate.
   \[
   PV_{\text{Years 1 to 5}} = \sum_{t=1}^{5} \frac{1,900}{(1 + 0.04)^t}
   \]

2. **Year 6**: The cash flow is $8,100.
   \[
   PV_{\text{Year 6}} = \frac{8,100}{(1 + 0.04)^6}
   \]

After calculating these values, we sum them to get the total present value of Asset D.

Let me calculate this for you.The present value of Asset D is approximately **$14,860.01**, rounded to the nearest cent.

Would you like more details on the calculation, or do you have any questions?

Here are 5 related questions to deepen your understanding:

1. How does the discount rate affect the present value of future cash flows?
2. Why do cash flows further in the future have a lower present value?
3. How would the present value change if the discount rate were higher than 4%?
4. What is the difference between simple and compound interest in these types of calculations?
5. How would a perpetual cash flow be valued using this method?

**Tip:** When calculating present value, a higher discount rate reduces the present value of future cash flows significantly.

Valuation of assets   Using the information provided in the following table, find the value of each asset: ... The value of Asset D is $enter your response here. (Round to the nearest cent.)

Learn how to calculate the present value of different assets using the discounting cash flow method. This problem involves finding the value of assets with varying cash flows and interest rates. Understand key financial concepts like the present value formula and the time value of money, suitable for students in Grades 11-12 and college-level finance courses.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation