10 Last Christmas Danny received an annual bonus of 1500 These annual bonuses

# 10 last christmas danny received an annual bonus of

• Homework Help
• 4

This preview shows page 2 - 4 out of 4 pages.

received at the end of year 2, and \$5,000 received at the end of year 3, all sums deposited at 5 percent.10) Last Christmas, Danny received an annual bonus of \$1,500. These annual bonuses are expected to grow by 5 percent for the next 5 years. How much will Danny have at the end of the fifth year if he invests his Christmas bonuses (including the most recent bonus) in a project paying 8 percent per year? 11) Calculate the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 15 percent.12) Compute the interest rate for a \$1,000 face value a bond that sells for \$280 and matures in 20 years. The bond
has no coupon payments, only the face value payment. 13) Calculate which has a higher present value: an annual payment of \$100 received over 3 years or an annual payment of \$50 received over 7 years. In both cases the interest rate is 7% (or 0.07). 14) Which investment plan will provide the highest future value: \$500 invested at 5 percent annually for four years and then that balance invested at 7 percent annually for an additional three years, or \$500 invested at 6 percent annually for seven years? 15) An investment grows from \$2,000 to \$2,750 over the period of 10 years. What average annual growth rate will produce this result? 16) Calculate the internal rate of return for a machine that costs \$500,000 and provides annual revenue of \$115,000 per year for 5 years. You can assume all revenue is received once a year at the end of the year. 17) You win your state lottery. The lottery officials offer you the following options: you can accept annual payments of \$50,000 for 20 years or receive an upfront payment of \$700,000. Ignoring issues like mortality tables, taxes, etc.; and assuming the first payment is made immediately, what market interest rate would make