Dontrell and Cadence are saving for their daughter Amira's college education. Amira just turned $10($at t $=0),$ and she will be entering college $8$ years from now $($at t $=8).$ College tuition and expenses at State U$.$ are currently $$15,000$ a year, but they are expected to increase at a rate of $4\mathrm{.}5\%$ a year. Amira should graduate in $4$ years$--$if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year $($at t $=8,9,10,$ and $11).$

So far, Dontrell and Cadence have accumulated $$13,000$ in their college savings account $($at t $=0).$ Their long$-$run financial plan is to add an additional $$6,000$ in each of the next $4$ years $($at t $=1,2,3,$ and $4).$ Then they plan to make $3$ equal annual contributions in each of the following years, t $=5,6,$ and $7.$ They expect their investment account to earn $10\%.$ How large must the annual payments at t $=5,6,$ and $7$ be to cover Amira's anticipated college costs?

a$.$ $$3,172\mathrm{.}58$

b$.$ $$2,884\mathrm{.}17$

c$.$ $$5,057\mathrm{.}67$

d$.$ $$4,597\mathrm{.}88$

eMoerdyk & Co$.$ is considering Projects S and L$,$ whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV$,$ i$.$e$.,$ no conflict will exist.

WACC: $6\mathrm{.}75\%$

$01234$

CFS $-$$$1,025$ $$650$ $$450$ $$250$ $$50$

CFL $-$$$1,025$ $$100$ $$300$ $$500$ $$700$

a$.$ $$63\mathrm{.}20$

b$.$ $$55\mathrm{.}46$

c$.$ $$59\mathrm{.}20$

d$.$ $$0\mathrm{.}00$

e$.$ $$154\mathrm{.}01.$ $$1,948\mathrm{.}21$