Each of the following parts is independent. Ignore income taxes. 1. Express Delivery plans to build a

Question:

Each of the following parts is independent. Ignore income taxes.
1. Express Delivery plans to build a new warehouse in four years to have more space for its products awaiting shipment. The warehouse will cost $500,000. What lump-sum amount should the company invest now to have the $500,000 available at the end of the four-year period? Assume that the company can invest money at
a. 6%.
b. 10%.
2. Washington Products Inc. can purchase a new electronic data storage server that will save $3,000 per year in paper storage and warehouse costs. The data server will last for five years and have no . What is the maximum purchase price that Washington Products would be willing to pay for the copier if the company’s required rate of return is
a. 9%?
b. 15%?
3. Susan has just won the million-dollar Power Lottery jackpot at a gambling casino. The casino will pay her $50,000 per year for 20 years as the payoff. If Susan can invest money at a 5% rate of return, what is the present value of her winnings? Did she really win a million dollars? Explain.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...