Fin 534 Chapter04_xlsSol

Fin 534 Chapter04_xlsSol - Problems Problem 4-9 Problem...

This preview shows pages 1–7. Sign up to view the full content.

Problems Problem 4-9 Problem 4-10 Problem 4-11 Problem 4-12 Problem 4-19 Problem 4-20 Problem 4-23 Problem 4-24 Problem 4-25 Problem 4-27 Problem 4-29 Problem 4-30 Problem 4-31 Problem 4-38 Problem 4-39

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Problem 4-9 Interest Rate: 3.50% Year 0 1 2 3 Cash flow: \$10,000.00 \$20,000.00 \$30,000.00 Present Value Using formulas 55,390.33 Using Excel functions 55,390.33 Future Value Using formulas 61,412.25 Using Excel functions 61,412.25 You have just received a windfall from an investment you made in a friend’s business. He will be paying you \$10,000 at the end of this year, \$20,000 at the end of the following year, and \$30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?
Problem 4-10 Interest Rate: 5.00% Year 0 1 2 Cash flow: \$1,000.00 \$1,000.00 Future value You have a loan outstanding. It requires making three annual payments at t next three years of \$1000 each. Your bank has offered to allow you to ski next two payments in lieu of making one large payment at the end of the l three years. If the interest rate on the loan is 5%, what final payment will the you to make so that it is indifferent between the two forms of payment?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
3 \$1,000.00 3,152.50 the end of the ip making the loan’s term in e bank require
Problem 4-11 Interest rate 6.00% NPV (2,609.36) Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow: (\$10,000.00) \$500.00 \$1,500.00 \$0.00 \$0.00 \$0.00 \$0.00 \$0.00 \$0.00 \$0.00 \$10,000.00 Discounted value (10,000.00) 471.70 1,334.99 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,583.95 NPV (2,609.36) At an interest rate of 6.00% the NPV is (2,609.36) so reject the project. At an interest rate of 2.00% the NPV is 135.43 so accept the project. The relationship is illustrated by the chart below: Data for NPV profile: 0% 2,000.00 1% 1,018.36 2% 135.43 3% -659.73 4% -1,376.75 5% -2,024.13 6% -2,609.36 7% -3,139.06 You have been offered a unique investment opportunity. If you invest \$10,000 today, you will receive \$500 one year from now, \$1500 two years from now, and \$10,000 ten years from now. a. What is the NPV of the opportunity if the interest rate is 6% per year? Should you take the opportunity? b. What is the NPV of the opportunity if the interest rate is 2% per year? Should you take it now? 0% 1% 2% 3% 4% 5% 6% 7% -4,000.00 -3,000.00 -2,000.00 -1,000.00 0.00 1,000.00 2,000.00 3,000.00 NPV Column M Discount rate NPV

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Problem 4-12 Interest rate 2.00% NPV using Excel function 5,729.69 Year 0 1 2 Cash flow: (\$1,000.00) \$4,000.00 (\$1,000.00) Discounted cash flow (1,000.00) 3,921.57 (961.17) NPV the "long" way 5,729.69 Marion should take the investment. Marian Plunket owns her own business and is considering an inves
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/10/2011 for the course FIN 534 taught by Professor Emil during the Spring '11 term at Aberystwyth University.

Page1 / 29

Fin 534 Chapter04_xlsSol - Problems Problem 4-9 Problem...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online