Alpha Geek

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  • bachelor in business administration
    Polytechnic State University Sanluis
    Jan-2006 - Nov-2010

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    Polytechnic State University
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Category > Accounting Posted 30 Apr 2017 My Price 3.00

Mr. Art Deco will be paid $230,000 one year hence.

Mr. Art Deco will be paid $230,000 one year hence. This is a nominal flow, which he discounts at an 7% nominal discount rate:

  

  PV =

230,000

 = $ 214,953
1.07

  

The inflation rate is 5%.

  

Calculate the PV of Mr. DecoAc€?cs payment using the equivalent real cash flow and real discount rate. (You should get exactly the same answer as he did.) (Do not round intermediate calculations. Round your "Real cash flow" and "Present value" answers to the nearest dollar amount and "Real discount rate" answer to 2 decimal places.)

  

   
  Real cash flow $      
  Real discount rate %
  Present value $   

Answers

Alpha Geek
(8)
Status NEW Posted 30 Apr 2017 09:04 AM My Price 3.00

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Attachments

file 1493543876-answer1.docx preview (125 words )
M-----------r. -----------Art----------- De-----------co -----------wil-----------l b-----------e p-----------aid----------- $2-----------30,-----------000----------- on-----------e y-----------ear----------- he-----------nce-----------. T-----------his----------- is----------- a -----------nom-----------ina-----------l f-----------low-----------, w-----------hic-----------h h-----------e d-----------isc-----------oun-----------ts -----------at -----------an -----------7% -----------nom-----------ina-----------l d-----------isc-----------oun-----------t r-----------ate-----------: ----------- Â-----------  ----------- Â----------- PV----------- = -----------230-----------,00-----------0 =----------- $ -----------214-----------,95-----------3 -----------1.0-----------7 Â----------- Â ----------- T-----------he -----------inf-----------lat-----------ion----------- ra-----------te -----------is -----------5%.----------- Â----------- Â ----------- C-----------alc-----------ula-----------te -----------the----------- PV----------- of----------- Mr-----------. D-----------eco-----------Acâ-----------‚¬?-----------cs -----------pay-----------men-----------t u-----------sin-----------g t-----------he -----------equ-----------iva-----------len-----------t -----------rea-----------l -----------cas-----------h f-----------low----------- an-----------d -----------rea-----------l -----------dis-----------cou-----------nt -----------rat-----------e. -----------(Yo-----------u s-----------hou-----------ld -----------get----------- ex-----------act-----------ly -----------the----------- sa-----------me -----------ans-----------wer----------- as----------- he----------- di-----------d.)----------- (-----------Do -----------not----------- ro-----------und----------- in-----------ter-----------med-----------iat-----------e c-----------alc-----------ula-----------tio-----------ns.----------- R-----------oun-----------d y-----------our----------- &q-----------uot-----------;Re-----------al
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