100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
FIN3704 Assignment 5 (Detailed Answers) Semester 2 Due 15 October 2024 $2.81
Add to cart

Exam (elaborations)

FIN3704 Assignment 5 (Detailed Answers) Semester 2 Due 15 October 2024

 10 views  0 purchase
  • Course
  • Institution
  • Book

Question 1 (10 Marks) Given the following set of cash flows: Period Cash Flow 1 45 000 25 000 (2) a. If your required rate of return is 9% per year, calculate BOTH the present and future value of the above stream of cash flows? b. Now, suppose that you are offered another investment that is...

[Show more]

Preview 2 out of 11  pages

  • October 3, 2024
  • 11
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
avatar-seller
FIN3704

Assignment 5

Semester 2

DUE 15 October 2024

Detailed Solution & Answers

, Question 1 (10 Marks)
Given the following set of cash flows:
Period Cash Flow
1. R45,000
2. R40,000
3. R35,000
4. R30,000
5. R25,000


a. Present and Future Value of the Cash Flows
The present value (PV) and future value (FV) of a series of cash flows can be calculated
using the formula:
• Present Value (PV):


𝐶𝐹𝑡
𝑃𝑉 = ∑
(1 + 𝑟)𝑡
𝑤ℎ𝑒𝑟𝑒 𝐶𝐹𝑡 𝑖𝑠 𝑡ℎ𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑎𝑡 𝑡𝑖𝑚𝑒 𝑡𝑡𝑡, 𝑎𝑛𝑑 𝑟𝑟𝑟 𝑖𝑠 𝑡ℎ𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒 (9% 𝑖𝑛 𝑡ℎ𝑖𝑠 𝑐𝑎𝑠𝑒).


• Future Value (FV):

𝐹𝑉 = ∑𝐶𝐹𝑡 × (1 + 𝑟)𝑛−𝑡

𝑤ℎ𝑒𝑟𝑒 𝑛𝑛𝑛 𝑖𝑠 𝑡ℎ𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 (5), 𝑎𝑛𝑑 𝑡𝑡𝑡 𝑖𝑠 𝑡ℎ𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑛 𝑤ℎ𝑖𝑐ℎ 𝑡ℎ𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑜𝑐𝑐𝑢𝑟𝑠.


The present value (PV) and future value (FV) for the given cash flows:

Period Cash Flow (R) PV at 9% (R) FV at 9% (R)

1 45,000 41,284.40 69,349.49

2 40,000 33,689.47 61,448.00

3 35,000 27,080.12 54,028.82

4 30,000 21,294.69 47,038.50

5 25,000 16,237.74 40,481.25

Total 139,586.42 272,346.06

• Total PV: R139,586.42

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller GeniusGears. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $2.81. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

50843 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$2.81
  • (0)
Add to cart
Added