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Unformatted text preview: sum is equal to the PV of the annuity, at a “fair” discount rate. If Danielle sees the 6.4% as fair, she will take the Lump sum. 2. Similar to #5 on TVM worksheet UCF is planning on buying an additional parking lot, located across the street from campus. They are planning on making this lot all metered parking, and collecting the proceeds at the end of each year for 75 years. The yearly proceeds are expected to be $315,000. UCF is willing to pay $1.5 million up front for this parking lot. Note: since the revenues are predictable and not risky, use a discount rate of 7%. Is UCF getting a good or bad deal? What is UCF’s annual rate of return for each of the next 75 years? Answer: Mode: end, P/Y= 1, n=75, I= 7%, PMT= 315,000, PV= ? PV= $4,784,882 Good Deal! N= 75, PV= -1.5 mil, PMT= 315,000, I= ?, I= 26.58% this is the “I” you would be getting for the project....
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This note was uploaded on 12/07/2010 for the course ACG 3361, 4401 taught by Professor Goldwater,canada,judd,byrd,theniel during the Spring '10 term at University of Central Florida.
- Spring '10