BUS 420
Time Value of Money Exam #1
Dr. Bartley R. Danielsen
1.
Would you rather receive $2000 today or $3500 in 9 years? Assume a discount
rate of 12 percent.
2.
You have received an offer of $120,000 for a tract of land, but payment is
deferred for 2 years.
If the interest rate is 6%, what is the value of the offer in
current dollars?
3.
You can buy a machine that costs $100,000.
It will generate $20,000 at the end of
each year for 7 years.
At the end of 7 years, it will cost an additional $5000 to
dispose of the machine.
What is the NPV of project if the relevant discount rate is
9%?
4.
Today a firm signed a contract to sell a capital asset for $50,000.
The firm will
receive the payment four years from today.
The asset costs $30,000 to produce,
payable immediately.
At what discount rate will the firm break even on the sale
of the asset?
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5.
What is the future value four years hence of $2,000 invested in an account with a
stated annual interest rate of 10 percent, compounded semiannually?
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 Spring '08
 poindexter
 Time Value Of Money, Net Present Value, Perpetuity

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