c D E F G H E An investment offers $6,100 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? 6,100 Payment per year # of years Required rate of return # of years # of years Complete the following analysis. Do not hard code values in your calculations. Your answers should be positive. Value today with 15 years payments Value today with 40 years payments Value today with 75 years payments Value today of perpetuity Sheet1 ... + READY @ 0 -- + 100% D13 D E F G H I If you put up $45,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual cash flow be? $ Initial investment Interest rate on annuity # of years 45,000 6.25% 15 Complete the following analysis. Do not hard code values in your calculations. Your answers should be positive. Annuity payment AL AB D E F G Your company will generate $68,000 in annual revenue each year for the next seven years from a new information database. If the appropriate interest rate is 8.5 percent, what is the present value of the savings? $ 68,000 Annual savings # of years Interest rate on annuity 7 8.5% Complete the following analysis. Do not hard code values in your calculations. Your answers should be positive. Present value What is the relationship between the value of an annuity and the level of interest rates? Suppose you just bought a 20-year annuity of $7,500 per year at the current interest rate of 10 percent per year. What happens to the value of your investment if interest rates suddenly drop to 5 percent? What if interest rates suddenly rise to 15 percent? 20 $ # of years Annuity payment per year Interest rate Interest rate Interest rate 7,500 10% 5% 15% Complete the following analysis. Do not hard code values in your answers. All answers should be positive values. Value of investment at 10% Value of investment at 5% Value of investment at 15% You want to have $75,000 in your savings account 12 years from now, and you're prepared to make equal annual deposits into the account at the end of each year. If the account pays 6.8 percent interest, what amount must you deposit each year? $ 75,000 Desired amount # of years Interest rate 12 6.8% Complete the following analysis. Do not hard code values in your answers. Your answer should be a positive value. Annual deposit
