Solutions 4-34, 40 & 6-14 - 5,000,000 $1,927,716.45...

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Chapter 4 Question 34 Input area: Current salary $50,000 Salary growth rate 2% Return 8% Salary increase 4% Deposit length 40 Output area: Next year's salary $52,000 Next year's deposit $1,040 Present value deposits $20,254.12 Future value of deposits $440,011.02
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Chapter 4 Question 40 Input area: First payment $1,000,000 Annual increase 400,000 Discount rate 10% Output area: Year Payments Present Value 0 $1,000,000 $1,000,000.00 1 1,400,000 $1,272,727.27 2 1,800,000 $1,487,603.31 3 2,200,000 $1,652,892.56 4 2,600,000 $1,775,834.98 5 3,000,000 $1,862,763.97 6 3,400,000 $1,919,211.36 7 3,800,000 $1,950,000.85 8 4,200,000 $1,959,331.00 9 4,600,000 $1,950,849.04 10
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Unformatted text preview: 5,000,000 $1,927,716.45 Present value $18,758,930.79 Chapter 6 Question 14 Input area: Annual cash flows: I II Year 0 $(30,000) $(5,000) Year 1 $15,000 $2,800 Year 2 $15,000 $2,800 Year 3 $15,000 $2,800 Required return 10% Output area: Profitability index (I) 1.243 Profitability index (II) 1.393 The profitability index implies accept Project II NPV (I) $7,302.78 NPV (II) $1,963.19 NPV decision rule implies accept Project I Using the profitability index to compare mutually exclusive projects can be ambiguous when the magnitude of the cash flows for the two projects are of different scale....
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