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Time Value Money Practice

# Time Value Money Practice - BUS 420 Time Value of Money...

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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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Time Value Money Practice - BUS 420 Time Value of Money...

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