Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1 ) Salem Co . has a year - end of December 3 1 and they are evaluating the cash flows of some potential investments

1) Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem is considering investing some of their current cash starting on Jan 1 in order to use the proceeds in a few years to purchase a new van that they will need to use in their daily business operations.
If they want to invest a $30,000 lump sum on Jan 1, compounded annually at an interest rate of at 6% for 4 years, how much will they have at the end of the 4 years to purchase the van?
2) Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem is considering investing some of their current cash starting on Jan 1 in order to use the proceeds in a few years to purchase a new van that they will need to use in their daily business operations.
How much would they have saved to purchase the van if they decide instead to make four $7,500 deposits made at the end of each of the next 4 years, earning interest of 6%?
3) Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem is considering investing some of their current cash starting on Jan 1 in order to use the proceeds in a few years to purchase a new van that they will need to use in their daily business operations.
If Salem plans to deposit $7,500 a year for the next four years on each January 1, at 6% interest compounded annually, how much will they have in 4 years to purchase the van?
4) Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem Co. rents some of their equipment out to other companies for extra cash flow. They are evaluating three different options to structure their rental agreement in order to earn the largest amount of payments as possible.
If they receive $85,300 in five years discounted at 7% compounded annually, what is the current value today of that cash flow?
5) Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem Co. rents some of their equipment out to other companies for extra cash flow. They are evaluating three different options to structure their rental agreement in order to earn the largest amount of payments as possible.
How much would it be worth today if they receive rental payments of $15,000 each, to be received at the end of each of the next five years when discounted at 7%?
6)Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem Co. rents some of their equipment out to other companies for extra cash flow. They are evaluating three different options to structure their rental agreement in order to earn the largest amount of payments as possible.
If Salem receives the rental payments of $15,000 for the next five years on each January 1 instead, at 7% compounded annually, how much is that worth today?
7)Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem Co. is considering a project that yields annual net cash inflows of $420,000 for Years 1 through 5, and a cash inflow of $100,000 in Year 6. The project will require and initial investment of $1,800,000. Salem's cost of capital is 10 percent and their reinvestment rate (for MIRR) is 8 percent.
What is Salem's expected NPV for this project?
8) Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.
Salem Co. is considering a project that yields annual net cash inflows of $420,000 for Years 1 through 5, and a cash inflow of $100,000 in Year 6. The project will require and initial investment of $1,800,000. Salem's cost of capital is 10 percent and their reinvestment rate is 8 percent.
What percentage is Salem's expected IRR for this project?
Salem Co. has a year-end of December 31 and they are evaluating the cash flows of some potential investments/projects they are considering for their next fiscal year, starting January 1.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets and Institutions

Authors: Anthony Saunders, Marcia Cornett

6th edition

9780077641849, 77861663, 77641841, 978-0077861667

More Books

Students also viewed these Finance questions