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4 pages/≈1100 words
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Level:
APA
Subject:
Visual & Performing Arts
Type:
Research Paper
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English (U.S.)
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# Determination of PV (Research Paper Sample)

Instructions:
Content:
Determination of PV
Part I
* Suppose your bank account will be worth \$7,000.00 in one year. The interest rate (discount rate) that the bank pays is 8%.
What is the present value of your bank account today?
PV = C/ (1+i) t
= 7,000/ (1+0.08)1= \$ 6,481.48
What would the present value of the account be if the discount rate is only 3%?
= 7000/ (1+0.03)1 =\$ 6,796.12
* Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth \$4,000.00 in one year. Account B will be worth \$9,600.00 in two years. Both accounts earn 5% interest.
What is the present value of each of these accounts?
Account A
PV = C/ (1+i) t
= 4000/ (1+0.05)1
= 3,809.52
Account B
PV = C/ (1+i) t
= 9600/ (1+0.05)1
= \$9,142.86
* PV = C/ (1+i) t
I= 8%
1st year
= 42,000,000/ (1+0.08)1
=\$38,888,888.89
2nd year
=62,000,000/ (1+0.08)2
=\$53,155,006.86
3rd year
=99,000,000/ (1+0.08)3
=\$78,589,391.86
PV = C/ (1+i) t
I= 6%
1st year
= 42,000,000/ (1+0.06)1
=\$39,622,641.51
2nd year
=62,000,000/ (1+0.06)2
=\$55,179,779.28
3rd year
=99,000,000/ (1+0.06)3
=\$83,122,309.02
PV = C/ (1+i) t
I=4%
1st year
= 42,000,000/ (1+0.04)1
=\$40,384,615.38
2nd year
=62,000,000/ (1+0.04)2
=\$55,117,774.24
3rd year
=99,000,000/ (1+0.04)3
=\$88,010,639.51
As the interest rate decreases the present value increases. This implies that in order to have substantial benefits with less investments, the interest rates must be high.
Part II: Evaluation of Projects
In this scenario, we are provided with three ...
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