TVM Review Problems You are planning on investing in a new factory. The cashflows from the factory will start at $50,000. You estimate they can grow at 2% and you plan to keep the factory in your business forever. If interest rates are 6%, 1 w much are you willing to pay for this factory? $1,250,000 Southeast Airlines needs to buy a new delivery truck. The retail price of the truck is $90,000. The dealer gives them the following options: a. Pay everything right away and receive a 15% discount on the total or b. Don't pay anything for 60 months, and then make the full payment of the truck. If interest rates are 6% APR, which is the better deal at the moment? $76,500 versus $66,723.5 As the CFO of the company, you are considering the following 2 mutually exclusive projects: Year Cashflow Project X Cashflow Project Y 3. 0 -300000 20000 50000 50000 390000 -40000 19000 12000 18000 10500 whichever project you choose, if any, you require a 15% return on your investment. a) If you apply the payback criterion, which investment will you choose? PBX 3.46, -2.5 b) If you apply the NPV criterion, which investment will you choose? PVx 35916.9, NPVy 3434.2 Ylfyou apply the IRR criterion, which investment will you choose? IRRx-16.296, IRRy 19.590 What is the present value of annual payments of $10,000 for a period of 10 years if the first payment is made 4 years from now? Assume an interest rate of 5%. $66,703.2 You are preparing to buy a vacation home five years from now. The home will cost $100000 at that time. You plan on saving three deposits at an interest rae(of 10%; Deposit 1: Deposit $12000 today Deposit 2: Deposit $15000 two years from now. Dposit 3: Deposit $ X three years from now. How much do you need to invest in year three to ensure that you have the 4. 5. necessary funds to buy the vacation home at the end of year five? $50,172.6