Question

Most of these problems will be easier using a spreadsheet.

1. What is the present value of a perpetuity with $5000 annual payments? Assume 3% discount rate.

2. How much money do you need to create an annuity of $2000/month for 20 years assuming you can invest the capital in an instrument (say treasuries) with a 3% rate and semi-annual compounding?

3. You wish to purchase a new car which costs $50,000. You have $10,000 for a down payment. The bank will charge you 8% (annual) and give you a 5-year loan (60 months). What is your monthly payment? Assume the interest is added at the end of each month.

4. Calculate the Payback, NPV, & IRR for the two projects.

a. For the Payback, assume first no discount rate and then discount the cash flows by 5%. How does the Discounted Payback period change?

b. For NPV, which project is best if the rate used is 10%? 15%?

c. What are the IRRs for each project?

year |
Project1 |
Project 2 |

0 |
-15000 |
-18000 |

1 |
9500 |
10500 |

2 |
6000 |
7000 |

3 |
2400 |
6000 |

Answer #1

1

PV = annual payment/discount rate = 5000/0.03=166666.67

2

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100 |

Effective Annual Rate = ((1+3/2*100)^2-1)*100 |

Effective Annual Rate% = 3.02 |

PV_{Ordinary Annuity} = C*[(1-(1+i/100)^(-n))/(i/100)] |

C = Cash flow per period |

i = interest rate |

n = number of payments |

PV= 2000*((1-(1+ 3.0225/1200)^(-20*12))/(3.0225/1200)) |

PV = 359890.48 |

Please ask remaining parts separately, questions are unrelated.
I have done one bonus

11-1 If Company XYZ plans to invest in a
project with initial capital outlay $52,125, annual net cash inflow
$12,000 for 8 years, and discount rate 12%, what is the Company
XYZ’s NPA?
11-2 For the Company XYZ’s same project as in
11-1, what is the IRR for the project?
There are two projects: Project A and Project
B
Project A: CF0 = -6000;
CF1-5 = 2000; I/YR = 14.
Calculate NPV, IRR, MIRR, Payback period, and discounted payback
period...

1. Learning Objectives
(a) Develop proforma Project Income
Statement Using Excel Spreadsheet
(b) Compute Net Project Cash
flows, NPV, IRR and PayBack Period
1) Life Period of the Equipment = 4 years
8) Sales for first year (1)
$ 200,000
2) New equipment cost
$ (200,000)
9) Sales increase per year
4%
3) Equipment ship & install cost
$ (25,000)
10) Operating cost:
$ (120,000)
4) Related start up cost
$ (5,000)
(60 Percent of Sales)
-60%
5) Inventory increase
$ 25,000
11) Depreciation (Straight Line)/YR
$ (60,000)
6) Accounts Payable...

1. Learning Objectives
(a) Develop proforma Project Income
Statement Using Excel Spreadsheet
(b) Compute Net Project Cash
flows, NPV, IRR and PayBack Period
1) Life Period of the Equipment = 4 years
8) Sales for first year (1)
$ 200,000
2) New equipment cost
$ (200,000)
9) Sales increase per year
4%
3) Equipment ship & install cost
$ (25,000)
10) Operating cost:
$ (120,000)
4) Related start up cost
$ (5,000)
(60 Percent of Sales)
-60%
5) Inventory increase
$ 25,000
11) Depreciation (Straight Line)/YR
$ (60,000)
6) Accounts Payable...

1. Learning Objectives
(a) Develop proforma Project Income
Statement Using Excel Spreadsheet
(b) Compute Net Project Cash
flows, NPV, IRR and PayBack Period
1) Life Period of the Equipment = 4 years
8) Sales for first year (1)
$ 200,000
2) New equipment cost
$ (200,000)
9) Sales increase per year
4%
3) Equipment ship & install cost
$ (25,000)
10) Operating cost:
$ (120,000)
4) Related start up cost
$ (5,000)
(60 Percent of Sales)
-60%
5) Inventory increase
$ 25,000
11) Depreciation (Straight Line)/YR
$ (60,000)
6) Accounts Payable...

(a) Develop
proforma Project Income Statement Using Excel Spreadsheet
(b) Compute Net Project Cash
flows, NPV, IRR and PayBack Period
(c) Develop Problem-Solving
and Critical Thinking Skills
1) Life Period of the
Equipment = 4 years
8) Sales for first year (1)
$ 200,000
2) New equipment cost
$ (200,000)
9) Sales increase per year
5%
3) Equipment ship &
install cost
$ (35,000)
10) Operating cost:
$ (120,000)
4) Related start up cost
$ (5,000)
(60 Percent of...

Using the Payback Method, IRR, and NPV Problems
Purpose of Assignment
The purpose of this assignment is to allow the student to
calculate the project cash flow using net present value (NPV),
internal rate of return (IRR), and the payback methods.
Assignment Steps
Resources: Corporate
Finance
Calculate the following time value of money
problems in Microsoft Excel or Word document. You must show all of
your calculations.
If you want to accumulate $500,000 in 20 years, how much do you...

Net Present Value Problem
Discount rate
12%
Project 1
Year 1
Year 2
Year 3
Year 4
Year 5
TOTAL
Costs
220,000
35,000
35,000
25,000
20,000
?
Discount factor
?
?
?
?
?
Discounted costs
?
?
?
?
?
?
Benefits
0
80,000
80,000
65,000
60,000
?
Discount factor
?
?
?
?
?
?
Discount benefits
?
?
?
?
?
?
Discounted benefits – Discounted costs (NPV)
?
?
?
?
?
?
ROI =
???...

Perform a financial analysis for a project using the format
provided in Figure 4-5. Assume that the projected costs and
benefits for this project are spread over four years as follows:
Estimated costs are $200,000 in Year 1 and $30,000 each year in
Years 2, 3, and 4. Estimated benefits are $0 in Year 1 and $100,000
each year in Years 2, 3, and 4. Use a 10 percent discount rate, and
round the discount factors to two decimal places....

What is the present value of the following series of cash
payments: $8,000 per year for four consecutive years starting one
year from today, followed by annual cash payments that increase by
2% per year in perpetuity (i.e. cash payment in year 5 is
$8,000*1.02, cash payment in year 6 is $8,000*1.022, etc.)? Assume
the appropriate discount rate is 5%/year. ( PLZ USE EXCEL TO ANSWER
IT)

1a. What is the present value of the following set of cash flows
if the discount rate is 13.9%? (the cash flows occur at the end of
each period) (round answer to nearest penny and enter in the
following format 12345.67)
Year 0 cash flow = -1400 (a negative cash flow)
Year 1 cash flow = 400
Year 2 cash flow = 2400
Year 3 cash flow = 1100
Year 4 cash flow = 2400
Answer:
1b. A credit card...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 17 minutes ago

asked 38 minutes ago

asked 42 minutes ago

asked 48 minutes ago

asked 52 minutes ago

asked 55 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago