1. consider the $50,000 excess cash.assume that gary invests the funds in a one -year CD.

   a.what is the CD's value at maturity ( future value )if it pays to percent(annual)interest ?

   b.what will its future value be if the CD pays 5 percent interest ?if it pays 15 percent interest?

   c. bank south offers CDs with 10 percent nominal (stated)interest,but compounded semiannually .what is the effective annual rate on this CD? What will the future value be after one year if $50,000 were invested?

   d.the pensacola branch of bank of america offers a 10 percent CD with daily compounding .what are the CD's effective annual rate and its value at maturity one year from now if $50,000 is invested ?(assume a 365-day year )

   e.what stated rate will bank south have to offer to make its semiannual -compunding Cd competitive with bank of america's daily -compounding CD?

2 .Rework Parts a through d of Question 1 assuming that each cd has a five year maturi

3 . Now consider the surgery centers%u2019 goal of having @200,000 available in five years to buy a new Patient billing system.

%u2028a. What lump sum amount must be invested today in a CD paying 10 percent annual interest to accumulate the needed $200,000?%u2028

b. What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

%u20284Now consider a second alternative for accumulating funds to buy the new billing system.In lieu of lump sum investment, assume that five annual payments of $32,000 are made at the of each year%u2028a.What type of annuity is this?%u2028

%u2028b.What is the present value of this annuity if the payments are invested in n account that pays 10 percent interest annually? 10 percent compounded annually?

1. What is the future value of this annuity if the payments are invested in an account that pays 10 percent interest annually? 10 percent compounded semi annually?%u2028

5 .Assume now that the payments are made at the beginning of the each period. Repeat the analysis in Q.4%u2028

6.now consider the uneven cash flow stream stemming from the lease agreement given in the case .

a) what is the present (year 0) value of the annual lease cash flows if the oppurtunity cost rate is 10 percent annually ?

b)what is the future value of this cash flow stream at the end of year 5 if the cash flows are invested at 10 percent annually? What is the present value of this future value when discounted at 10 percent ?what does this result indicate about the consistency inherent in time value analyses ?

c)Does the office renovation and subsequent lease agreement appear to be a good investment for the company ?(hint : compare the cost of renovation with the pressent value of the lease payments .use a 10 percent discount rate for the analyses?

7 . now assume that it is five years later and the company is unable to accumulate the $200,000 needed to make the software purchase .Instead ,it is forced to borrow the $ 200,000. The loan calls for repayment in equal annual installments over a four -year period ,with the first payment due at the end of one year .Assuming that the company can borrow the funds at 10 percent rate , what amount of interest and principal will be repaid at the end of each year of the loan?

8. throughout this case , you have been either discounting ,or compoundind cash flows .many financial analyses ,such as bond refunding decisions,capital investment decisions ,and lease decision ,involve discounting projected future cash flows .what is the appropriate rate in such situations ?what factors influence the value of this rate ?