1. Here is your 25-year savings plan:

$3,600 each year for the next two years. You will earn just 1.0% interest, or return, on this savings. $6,000 per year for years 3, 4, and 5. Because you will have learned to be a smart beginning investor by this time, you believe you can earn a 6.0% annual return on any invested funds. $15,000 per year for the remaining 20 years. By this time you expect to earn a 12.0% annual return. If you never withdraw any funds from the account, if all funds earn the going rate of return for the time period, and if all of your savings is deposited at the end of each year, how much should you have in total at the end of 25 years? A.) about $749,303 B.)about $979,661 C.)about $1,348,178

2. Your firm is considering an investment in new capital equipment that is expected to generate the annual cash flows indicated in the table below. If the initial investment required is $170 and the company's opportunity cost of capital is 10.4%, what is the net present value of these cash flows? Year 1 Year 2 Year 3 Cash inflows $100 $298 $326 Cash outflows $75 $25 $57

3.) As a financial manager for Fake Company Zeta, you have been evaluating your company's preferred shares. The dividend on those shares is $2.62 and has been at that number for many years. The market price of these shares hovers around $53.38. What does this imply about the opportunity cost of investing in these preferred shares, based on market prices?

4.) Your firm is looking to make a major capital investment. Good financial analysis produced the cash flows illustrated in the table below. The cash outflows represent estimated costs, and the cash inflows represent estimated benefits. Assume all cash flows are received or are paid at the end of the year.

If your company's opportunity cost of capital is 15%, what is the net present value of this capital investment? Now 2016 2017 2018 2019 2020 Cash inflows $0 $415,600 $475,000 $625,000 $625,000 $600,000 Cash outflows $500,000 $500,000 $500,000 $0 $300,000 $0 A). about $367,996 B.)about $302,779 C.)about $802,779

5) An investment advisor has lunch with you one day and gives you the following two investment products her company is now recommending:

Invest $10,000 for ten years. At the end of the ten years, the company will return $20,000 to you. Invest $10,000 for eight years. At the end of the eight years, the company will return $18,000 to you. You know from experience that a good estimate for your opportunity cost of your investing dollars is about 6.0%. Given that, which of these products is the best one for you? Why?

A.) #1 is the better investment. Even without using time value, it is clear that $20,000 in 10 years is going to be better than $18,000 in eight years. The two-year difference is just not so much. B.) #2 is the better investment. #2 has a PV of about $11,293. That compares to a PV of #1 of about $11,169. c.) #2 is the better investment. #2 has a PV of about $9,725. That compares to a PV of #1 of about $9,264.