1. What is the present value of a fund that earns 18% on its balance each year, from which $10,000 must be paid a year for 5 years, after which the balance of the fund will be zero? Your answer should be a whole number.
2. If we invest $20,000 in a company that earns 8% per year on invested capital, and if they reinvest the earnings, how much is the investment worth at the end of 10 years?
Your answer should be a whole number.
3. A company can invest in a project that will raise its revenues by $7,000 per year after taxes. The project costs $30,487.10 initially and has an anticipated life of 6 years. If the company can earn 12% after taxes on capital invested in other projects, what is the NPV of the project? Your answer should be entered as a whole number.
4. Find the payback period for the project in question 3. Your answer should be have 4 decimal places
5. Find the internal rate of return (IRR) for the project in question 3. Enter the IRR as a whole number
6. It is desired to repay a loan of $20,000 in 12 equal annual installments, where the loan earns interest at the rate of 10% per year. How much should be paid each year?
Enter your answer as a whole number
7. The US EPA has determined that cleaning up the local watershed so it will meet healthy water standards will cost $300 million. They support their claim for the need to do this project by saying that the economic value of the healthy water to the citizens in the area is $15 million dollars per year in lower health costs, recreation, and quality of life. These benefits are expected to continue for 50 years. The opportunity cost of government money is normally the current rate of treasury bills which is 3%/year. Using Benefit/Cost Analysis determine if this use of government money makes sense. Enter the Benefit/cost ratio to 3 decimal places
8. Compute the present value of $10,000 to be received in 30 years, if the interest of 8% per year is compounded annually.
Enter your answer as a whole number
9. Compute the present value of $10,000 to be received in 30 years, if the interest of 8% per year is compounded quarterly.
Enter your number as a whole number
10. A department store offers the following credit terms on a new appliance "slashed" to a price of $420: only $40 down, and the balance in 24 monthly installments of $25. What monthly interest rate is the company implicitly charging its credit customers? Enter your answer as a whole number
11. Equivalent Annual Cost (EAC) (The Amortization Method, see Module page11.4) Your golf course has the opportunity to choose between two mowers.
Choice #1 costs $75,000 and is expected to last 5 years.
Choice #2 costs $100,000 and is expected to last 7 years. Typically, the golf course earns a return of 12% on this type of investment.
Determine the Equivalent Annual Cost (EAC) for choice #1. Round your answer to the nearest dollar
12. Equivalent Annual Cost (EAC) (The Amortization Method, see Module page 11.4) Your golf course has the opportunity to choose between two mowers.
Choice #1 costs $75,000 and is expected to last 5 years.
Choice #2 costs $100,000 and is expected to last 7 years. Typically, the golf course earns a return of 12% on this type of investment.
Determine the Equivalent Annual Cost (EAC) for choice #2. Round your answer to the nearest dollar