Question

How much would have to be deposited monthly to obtain an amount of 10 million if a rate of 15% nominal annual due month is considered, if the deposit is made for 3 years?

An investor is proposed to invest 10 million and is told that in the next 5 years he will receive 3 million each year. If your opportunity rate is 20% per annum, do you agree to accept the business?

Answer 1

FVAnnuity Due = c*(((1+ i)^n - 1)/i)*(1 + i )

C = Cash flow per period

i = interest rate

n = number of payments

10000000= Cash Flow*(((1+ 15/1200)^(3*12)-1)/(15/1200))*(1+15/1200)

Cash Flow = 218916.82 = monthly payment

Discount rate	20.000%
Year	0	1	2	3	4	5
Cash flow stream	-10	3	3	3	3	3
Discounting factor	1.000	1.200	1.440	1.728	2.074	2.488
Discounted cash flows project	-10.000	2.500	2.083	1.736	1.447	1.206
NPV = Sum of discounted cash flows
NPV Project =	-1.03
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
Reject project as NPV is negative