5. Coastal Shipping is setting aside capital to fund an expansion project. Funds earmarked for the project will accumulate at the rate of $50,000 per month until the project is completed in two years. Once the project starts, costs will be incurred at a rate of $150,000 per month over 24 months. Coastal currently has $250,000 saved. What is the minimum number of months it will have to wait before it can start if money is worth 18 % nominal annual, compounded monthly. Assume the following: a) Cash flows are at the ends of months. b) The first $50,000 savings occurs one month from today. c) The first $150,000 payment occurs one month after the start of the project. d) The project must start at the beginning of a month. (5 marks) 6. SlamCo is saving money to purchase capital equipment in 4 years. Today the firm has $120,000. It would like to have $700,000 at the end of 4 years. If the firm is to save money at the end of each month starting at the end of the first month, how much money must it save each month if the interest rate is 3% nominal annual, compounded monthly? (4 marks)1. An investment makes the payments as shown in the cash flow diagram below. All payments occur at the end of each indicated year. $700,000 $900,000 $300,000 $500,000 3 9 12 6 (a) If the interest rate is 4% nominal annual compounded monthly, calculate the effective 3 year interest rate. (2 marks) (b) Calculate the equivalent annuity value of this investment and draw its cash flow diagram. (4 marks) (c) What is the value today of this investment? (4 marks) 2. A professional athlete has signed a contract for 5 years that pays him $5,000,000 each year at the end of each year. (a) Draw a cash flow diagram of the contract. (4 marks) (b) If the interest rate is 4.3%% nominal annual, compounded monthly, what is the present value of this contract? (4 marks) (c) Suppose the athlete wishes to defer his pay from this contract for the next 20 years. How much would he be paid each month if the interest rate were as in question b? (4 marks) 3. An investment pays as shown in the cash flow diagram below. $60,000 $40,000 $35,000 $20,000 2 6 8 An investor would like to turn the above incomes into an annuity paying on the same dates. The interest rate is 3% nominal annual compounded monthly for the duration of the above project. (a) Calculate the equivalent 2 year interest rate. (3 marks) (b) Calculate the present value of the above investment. (3 marks) (c) Calculate the annuity value for each of the four annuity payments. (4 marks) 4. EncryptCo is considering the purchase of an encryption machine that will save the firm $320 each month. (a) Draw the cash flow diagram for the machine. (3 marks) (b) If the machine costs $28,000, how long must EncryptCo keep the machine for it to pay for itself