• Submission file format: Word document with all the answers, clearly identifying all steps, results, journals, ledger accounts and including

Problem 1

The Company System action Inc, wanted to know their net present value if they invest 10.000 EUR today. The expected cash flows at the end of each years are 2000 EUR, 1500 EUR, 1500 EUR and 3200 EUR, and the Cost of the opportunity of capital is 6,6%

Instructions

Calculate the Net Present Value (10 points)

Problem 2

Company Health for you , Ltd, made an investment of 7.000 EUR initially for a period of 3 years.

Instructions

Calculate the value of the investment after a period of 3 years when the investment gives the return of 10 % compounded monthly.(10 points) Calculate the EAR of this operation. (10 points)

Problem 3

The company Terracota Inc is considering to start a new product line. The new product line requires the installation of new machines and equipment. For this purpose, company wants to borrow money by issuing bonds of 10.000 EUR for 12-year period. The interest is to be paid at a rate of 8% per year.

Instructions

Calculate the amount of interest to be paid to bondholders over 12-year period:

1. a) With simple interest charged. (10 points)

2. b) With interest compounded annually. (15 points)

Problem 4

Mary plans to retire in 15 years. After retirement, she will need an amount of 20,000 EUR to start a coffee shop business.

Instructions

Calculate the amount Mary needs to invest today to have an amount of 20,000 EUR upon her retirement assuming an interest rate of::

1. a) 10% compounded annually. (15 points)

2. b) 14% compounded annually. (15 points)

Problem 5

If you initially invest, 12.000 EUR in a bank account that offer a compound interest rate of 8%, for how long you should keep that money there in order to finally obtain 26.000 EUR?

Instructions

Calculate the time.( 15 points)