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The chief financial officer of a home health agency needs to determine the present value of a $120,000 investment received at the end of year 20. What is the present value if the discount rate is
4 percent?
6 percent?
8 percent?
10 percent?
Erie General Hospital wants to purchase a new blood analyzing device today. Its local bank is willing to lend it the money to buy the analyzer at a 2 percent monthly rate. The loan payments will start at the end of the month and will be $2,600 per month for the next eighteen months. What is the purchase price of the device?
Upon the untimely and tragic death of their wealthy uncle, his heirs wanted to memorialize him with a named donation to the local hospital. They offered the hospital a choice of $60,000 annual payments forever or a lump sum payment of $700,000 today:
What should be the decision if the hospital thinks it could earn an average of 5 percent annually on this donation?
What should be the decision if the hospital thinks it could earn an average of 9 percent annually on this donation?
What should be the decision if the hospital thinks it could earn an average of 13 percent annually on this donation?
Darby Hospital is borrowing $81 million for its medical office building. The annual interest rate is 4 percent. What will be the equal annual payments on the loan if the length of the loan is four years and payments occur at the end of each year?
A wealthy philanthropist has established the following endowment for a hospital. The details of the endowment include the following:
A cash deposit of $19 million one year from now.
An annual cash deposit of $14 million per year for the next fifteen years. The first $14 million deposit will be made today.
At the end of year 15, the hospital will also receive a lump sum payment of $26 million.

Assuming the cost of money is 4 percent, what is the value of this endowment in today’s dollars?

Holy Spirit Hospital is reviewing the details of several bank loans. Bank A offers a nominal rate of 6 percent compounded semiannually. Bank B offers a nominal rate of 6 percent compounded quarterly. Bank C offers a nominal rate of 6 percent compounded monthly. What is the effective rate of each loan, and which loan should the hospital accept?