3.

A factory costs $811,225. You forecast that it will produce cash inflows of $575,857 in year 1, $155,000 in year 2, and $300,000 in year 3. The discount rate is 10.00%.

a.	Calculate the PV of cash inflows. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

b.	Should the company invest in the factor?
	(Click to select) The firm should invest The firm should not invest

4.

You have decided to invest $920 into a savings account which pays an annual interest rate of 8%. What is the value of the savings account in 16 years?

6.

Your landscaping company can lease a truck for $8,300 a year (paid at year-end) for 6 years. It can instead buy the truck for $40,000. The truck will be valueless after 6 years. The interest rate your company can earn on its funds is 7%.

a.	What is the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value of lease $

b.	Is it cheaper to buy or lease?
	multiple choice 1 Buy Lease

c-1.	What if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value of lease $

c-2.	Is it cheaper to buy or lease?
	multiple choice 2 Buy Lease

8.

John is buying a security that will pay $110 each year for the next 10 years. He is thinking about selling the security in 6 years. What price does John think he can sell the security for, if he believes the interest rate will be 9% in 6 years?