1. Marx decided to deposit $1,000 in a savings account in each year for 20 years. The savings account will earn an interest rate of 5% annually. All cash flow occurs at the end of a year. How much will the savings account be worth at the end of the Year 20? Show your calculations.

2. Makiko decided to invest in an investment plan in each year for 25 years. The investment will earn an interest rate of 6% annually. She will invest $2,000 in each year for the investment plan. All cash flow occurs at the end of a year. How much is the investment worth today? How much will the investment be worth 5 years later? Show your calculations.

3. Wendy decided to invest in an investment plan in each year for 30 years. The investment will earn an interest rate of 8% annually. The investment is worth $90,000 today. All cash flow occurs at the end of a year. How much will she invest in each year in the investment plan? Show your calculations.

4. Sachiko decided to invest in an investment plan in each year for 40 years. The investment will earn an interest rate of 5% annually. She will invest $2,000 in each year in the investment plan. In order to do so, she will give up similar investments that will earn an interest rate of $4% annually (Hint: use this opportunity cost (4%) to calculate present value of the investment). All cash flow occurs at the end of a year. How much is the investment worth today? Show your calculations.

5. True or false: Managers should try their best to maximize the reported revenues to make investors happy even if this may violate accounting rules. No explanation is required.

6. Which of the following should managers do to maximize earnings? Choose the best answer. No explanation is required.

a) Use child labor to reduce the cost of products.

b) Collude with competitors to increase sales prices.

c) Increase product quality to reduce sales returns and allowances due to product defect.

d) Ship more products than customers ordered and record revenues based on the shipped products.