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Using the present value (PV) and future value (FV) formulas below only, answering the following showing all work: PV(CF) = CF / (1+r) n FV(CF)
Using the present value (PV) and future value (FV) formulas below only, answering the following showing all work:
PV(CF) = CF / (1+r)n
FV(CF) = CF * (1+r)n
- You bought furniture for your new home, and the store offers you two alternative payment plans. The first plan requires a $4,000 immediate up-front payment. The second plan requires you to make annual payments of $850, payable at the end of each year for 5 years. Assume that the interest rate is 4% for the next 5 years. Which plan would you choose, and why? Please provide an analysis to support your answer.
- Suppose you work for an investment company. You are negotiating a 6-year loan of $1,000,000 made to Green Services Corporation. Green Services agrees to pay $50,000 at the end of Year 1, $100,000 at the end of Year 2, and a fixed payment at the end of each year from Year 3 through Year 6. Based on your analysis, you are confident Green Services will be able to make the promised payments, as Green Services' financials look healthy. Assume the annual interest rate will remain at 8% for the next 6 years. Determine the fixed amount Green Services will pay at the end of each of the final 4 years. (Draw a timeline and show your work.)
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