Fin 534 Chapter04_xlsSol

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

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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
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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)?
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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?
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3 $1,000.00 3,152.50 the end of the ip making the loan’s term in e bank require
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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
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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
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Fin 534 Chapter04_xlsSol - Problems Problem 4-9 Problem...

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