Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please help with these questions if you can, I cannot understand how to properly do them. Any help is much appreciated. 1. (Related to Checkpoint
Please help with these questions if you can, I cannot understand how to properly do them. Any help is much appreciated.
1. (Related to Checkpoint 5.6) (Solving for i) You are considering investing in a security that will pay you $2,000 in 35 years. a. If the appropriate discount rate is 10 percent, what is the present value of this investment? b. Assume these investments sell for $360 in return for which you receive $2,000 in 35 years. What is the rate of return investors earn on this investment if they buy it for $360? Page Break 2. Jack asked Jill to marry him, and she has accepted under one condition: Jack must buy her a new $330,000 Rolls-Royce Phantom. Jack currently has $14,390 that he may invest. He has found a mutual fund with an expected annual return of 8 percent in which he will place the money. How long will it take Jack to win Jill's hand in marriage? Ignore taxes and inflation. The number of years it will take for Jack to win Jill's hand in marriage is ____ years. 3. Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $4,000,000 and would generate annual net cash inflows of $900,000 per year for 9 years. Calculate the project's NPV using a discount rate of 5 percent. 4. Carson Trucking is considering whether to expand its regional service center in Mohab, UT. The expansion requires the expenditure of $9,000,000 on new service equipment and would generate annual net cash inflows from reduced costs of operations equal to $4,000,000 per year for each of the next 9 years. In year 9 the firm will also get back a cash flow equal to the salvage of the equipment, which is valued at $0.9 million. Thus, in year 9 the investment cash inflow totals $4,900,000. Calculate the project's NPV using a discount rate of 10 percent. 5. Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash flows of $20,000 per 11 years a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 14 percent? Should the project eb accepted? Why or why not? C. What is this project's internal rate of return? Should the project be accepted? Why or why not? 6. (Related to Checkpoint 5.6) (Solving for ) You are considering investing in a security that will pay you $4,000 in 31 years. a. If the appropriate discount rate is 8 percent, what is the present value of this investment? b. Assume these investments sell for $851 in return for which you receive $4,000 in 31 years. What is the rate of return investors earn on this investment if they buy it for $851? 7. (Related to Checkpoint 5.4) (Present value) What is the present value of $600 to be received 8 years from now discounted back to the present at 12 percent? The present value of $600 to be received 8 years from now discounted back to the present at 12 percent is $. (Round to the nearest cent.) 8. (Related to Checkpoint 5.6) (Solving for At what annual interest rate, compounded annually, would $480 have to be invested for it to grow to $1,917.89 in 10 years? The annual interest rate, compounded annually, at which $480 must be invested for it to grow to $1,917.89 in 10 years is% (Round to two decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started