Tutorial 4

Tutorial 4 - $10,489 for six years is approximately 4...

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Finance Department Managerial Finance S11 Managerial Finance Tutorial 4 Page 1 of 1 Tutorial (4) Chapter 4 : Time Value of Money 1) Assume that you just won the state lottery. Your prize can be taken either in the form of $40,000 at the end of each of the next 25 years (i.e $1,000,000 over 25 years) or a single amount of $500,000 paid immediately. If you expect to be able to earn 5% annually on your investments over the next 25 years, ignoring taxes and other considerations, which alternative should you take? Why? 2) Julian was given a gold coin originally purchased for $1 by his great-grandfather 50 years ago. Today the coin is worth $450. The rate of return realized on the sale of this coin is approximately equal to: 3) The rate of return earned on an investment of $50,000 today that guarantees an annuity of
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Unformatted text preview: $10,489 for six years is approximately 4) EcoSystems, Inc. is preparing a five-year plan. Today, sales are $1,000,000. If the growth rate in sales is projected to be 10 percent over the next five years, what will the dollar amount of sales be in year five? 5) David wishes to accumulate $1 million by the end of 20 years by making equal annual end-of-year deposits over the next 20 years. If David can earn 10 percent on his invest-ments, how much must he deposit at the end of each year? 6) Cara establishes a seven-year, 8 percent loan with a bank requiring annual end-of-year payments of $960.43. Calculate the original principal amount....
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