Question
(Can this be plugged into the finance Calculator?) ******* 1.) You want to buy a house within 3 years, and you are currently saving for
(Can this be plugged into the finance Calculator?) *******
1.) You want to buy a house within 3 years, and you are currently saving for the down payment. You plan to save $5,000 at the end of the first year, and you anticipate that your annual savings will increase by 10% annually thereafter. Your expected annual return is 7%. How much will you have for a down payment at the end of Year 3?
2.) You are thinking of buying a miniature golf course. It is expected to generate cash flows of $40,000 per year in years one through four and $50,000 per year in years five through eight. If the appropriate discount rate is 10%, what is the present value of these cash flows? Please round your answer to the second decimal.
3.) You have just won a magazine sweepstakes and have a choice of three alternatives:
1) You can get $100,000 now
OR 2) You can get $10,000 per year in perpetuity
OR 3) you can $50,000 now and $150,000 at the end of 10 years.
If the appropriate discount rate is 12%, please calculate PV of three options:
Present value of $100,000 now:
Present value of $10,000 per year in perpetuity:
Present value of $50,000 now and $150,000 at the end of 10 years:
4.) What is the present value of a $100 perpetuity if the interest rate is 7%? Please round your answer to the second decimal.
5.) A growing perpetuity has an annual cash flow of $1000 that will continue indefinitely. This cash flow is expected to grow at 5% per year and the required return used for the discount rate is 10%. What is the present value of this growing perpetuity?
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