1. What is the value of $100,000 in 25 years assuming 2.8% inflation? 2. You are promised $1,000,000 in five years. Assuming that you can earn 5% interest on investments, how much is that worth now?

2: Compounding 1. What is the equivalent future value of $70,000 when compounded at 2.8% for 10 years? 2. You invest $50,000 in bonds that will give you a return of 5.6%. You intend to leave the funds invested until you retire in 35 years. How much money will you have from this investment?

3: The model T owed a great deal of its success to its low cost. Henry Ford stated that I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one and enjoy with his family the blessing of hours of pleasure in God's great open spaces. (Wikipedia; italics added for emphasis) Use the information that you can find at: https://en.wikipedia.org/wiki/Ford_Model_T and information available on average pay to determine whether Ford achieved his goal of offering an affordable car to the masses

Question 4: For the following cash flow stream, calculate the following, assuming a 10% interest rate: 1. The present value 2. The future value at year 10 3. The equivalent value at year 6 Year 1 2 3 4 5 6 7 8 9 10 Cash Flow ($) 1453 1762 1679 1982 2130 2498 2356 2789 2873 3120 Question 5: Calculate the present value of the following mixed cash flow stream assuming a 12% interest rate. Year 0 1 2 3 4 5 -$20,000.00 $5,400.00 $5,200.00 $5,800.00 $6,200.00 $5,800.00

Question 6: For the following cash flow stream, calculate the present value if the interest rate for years 1 through 5 is estimated to be 5% and the interest rate from years 6 through 10 is estimated to be 10%. Year 1 2 3 4 5 6 7 8 9 10 CF ($) 2300 2400 2200 1900 2500 2300 2600 2600 2600 2600

Question 7: Assume that you are presently 30 years old and that you intend to retire when you turn 65. You would like to make sure that you have enough funds at the point of retirement to last until you are 95. You estimate that it would take $50,000 per year, in todays dollars to maintain a lifestyle that you desire. Assume inflation is 2.8% and that you can get an 8% return on your long term investments until you retire. You also estimate that you should be able to get a 6% return on your investment after you retire. 1. How much should you be setting aside annually between now and your retirement to meet your goals? 2. What happens if you decide to wait an additional 15 years before starting to save for retirement? How much would you then have to set aside? 3. You suddenly got ill and had to retire unexpectedly at 55? If you maintained a standard of living of $50,000 per year, in todays dollars, what age would you be when your money ran out?

8 What does the Net Present Value evaluate? How should the dollar amount that the net present value generates in its calculations be interpreted? 2. Calculate the Net Present Value for the project that requires an investment of $91,347, has the estimated returns given in the following table, and must meet a minimum acceptable rate of return of 15%: Year 1 2 3 4 5 Cash Flow $23,456 $24,567 $26,435 $27,412 $28,490 Question 9: Internal Rate of Return 1. What does the Internal Rate of Return evaluate? How should the percentage value that the IRR calculation provides be interpreted? 2. Calculate the IRR for the project that has a $86,347 investment and the following returns. Should this project be undertaken if the MARR is 16%? Year 1 2 3 4 Cash Flows $34,762 $27,893 $20,674 $43,568 3. Calculate the IRR for the following cash flow stream: 0 1 2 3 4 5 Cash Flows -$12,000 $56,000 $12,000 -$180,000 $24,000 $120,000