1 You are considering investing in a company that makes cell phones. It will take three years for the business to sell its first product. You can expect to make $200k in year 4 and $600k in each of years 6, 7 and 8. Your return on alternative investments is 6%. How much can you afford to invest (to the nearest $1k)? There is more than one right answer (A) (B) (C) (D) (E) $2,000,000 $1,357,000 =$200k (PV/FV,6%, 4)+$600k(PV/A,6%,3) (PV/FV,6%,5) =$200k (PV/FV,6%, 4)+$600k(PVIA,6%,3)(PV/FV,6%,6) =$200k/(1.06)^4+$600k/(1.06)^6 2. You loan $2,000 to a friend at 6% interest. How would you calculate the annual payments you should receive in each of the next 5 years if the interest rate is 6% ? There are two correct answers. (A) (B) (C) (D) (E) $2,000(A/PV, 6%,5) $2,000(FV/PV, 6%,5)(A/PV, 6%, 5) $2,000((1+0.06)^5)(A/FV, 6%, 5) $2,000(PVIA, 6%,5) $2,000(FV/PV, 6%,5)