Practice exam 2

# Practice exam 2 - BUS 420 Time Value of Money Exam#5 Dr...

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BUS 420 Time Value of Money Exam #5 Dr. Bartley R. Danielsen 1. Would you rather receive \$4000 today or \$5500 in 3 years? Assume a discount rate of 10 percent. 2. You have received an offer of \$260,000 for a tract of land, but payment is deferred for 3 years. If the interest rate is 9%, what is the value of the offer in current dollars? 3. You can buy a machine that costs \$80,000. It will generate \$20,000 at the end of each year for 5 years. At the end of 5 years, it will cost an additional \$4000 to dispose of the machine. What is the NPV of project if the relevant discount rate is 10%? 4. Today a firm signed a contract to sell a capital asset for \$20,000. The firm will receive the payment three years from today. The asset costs \$14,000 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 three years hence of \$7,000 invested in an account with a stated annual interest rate of 8 percent, compounded semiannually?
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Practice exam 2 - BUS 420 Time Value of Money Exam#5 Dr...

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