April 15 + Section Problems.xlsx - A business venture has a \$25,000 initial cost and returns annual end of year cash flows of \$7,000 \$8,000 \$9,000 and

# April 15 + Section Problems.xlsx - A business venture has a...

• 9

This preview shows page 1 - 4 out of 9 pages.

A business venture has a \$25,000 initial cost and returns annual end of year cash flows of \$7,000; \$8,000; \$9,000; and \$10,000 for years 1-4, respectively, before closing down. The company’s accountant determines that the Net Present Value (NPV) of the project is \$4,851. What cost of capital (discount rate) is the accountant using? (round to one decimal place)
You hope to double your money in five years. You invested your money with Donald J. Trump who promised you a 15% annual return, which would satisfying your goal. Unfortunately, the first two years did not go as planned. Your investment actually lost 30% per year. What annual rate of return do you now need in Years 3-5 in order to achieve your original goal of doubling your money?
Fun-Time University (FTU) is financially struggling. The university’s online degree program – though cheap and very easy – did not prepare students for real jobs. Enrollment is expected to decline as news of graduates living in their parents’ basements spreads. FTU has fixed expenses of \$1,000,000 per year, payable at the end of each year. Each student pays \$10,000 tuition at the end of the year