The four people below have the following investments.
| Invested Amount | Interest Rate | Compounding | |||
| Jerry | $ 11,900 | 12% | Quarterly | ||
| Elaine | 14,900 | 10 | Semiannually | ||
| George | 21,900 | 6 | Annually | ||
| Kramer | 17,900 | 8 | Annually | ||
Required:
1-a. Calculate the future value at the end of five years. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
1-b. Who has the greatest investment accumulation?
Determine the present value of the following single amounts.
Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
You would like to start saving for retirement. Assuming you are now 20 years old and want to retire at age 50, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 8% per year over the past 80 years and is expected to continue at this rate. You decide to invest $1,000 at the end of each year for the next 30 years.
Required:
Calculate how much your accumulated investment is expected to be in 30 years.
Note: Use tables, Excel, or a financial calculator. Round your answer to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:
- Pay $25,000 today for the car.
- Pay $2,000 at the end of each quarter for three years.
Required:
1-a. Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value.
1-b. Which option gives him the lower cost?
Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine:
- Pay $1,080,000 in cash immediately.
- Pay $400,000 immediately and the remainder in 10 annual installments of $82,000, with the first installment due in one year.
- Make 10 annual installments of $140,000 with the first payment due immediately.
- Make one lump-sum payment of $1,610,000 five years from date of purchase.
Required:
Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 8% interest rate.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows:
| Years | Amount |
| 1-6 | $ 92,000 |
| 7 | 82,000 |
| 8 | 72,000 |
| 9 | 62,000 |
| 10 | 52,000 |
If purchased, the restaurant would be held for 10 years and then sold for an estimated $820,000.
Required:
Determine the present value, assuming that Helga desires a 10% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corporation. The machine can be used for 10 years and then sold for $24,000 at the end of its useful life. Lollie has presented Kiddy with the following options:
- Buy machine. The machine could be purchased for $174,000 in cash. All maintenance costs, which approximate $19,000 per year, would be paid by Kiddy.
- Lease machine. The machine could be leased for a 10-year period for an annual lease payment of $39,000 with the first payment due immediately. All maintenance costs will be paid for by the Lollie Corporation and the machine will revert back to Lollie at the end of the 10-year period.
Required:
Assuming that a 8% interest rate properly reflects the time value of money in this situation and that all maintenance costs are paid at the end of each year, determine which option Kiddy should choose. Ignore income tax considerations.
Note: Ro
The four people below have the following investments.
| Invested Amount | Interest Rate | Compounding | |||
| Jerry | $ 11,900 | 12% | Quarterly | ||
| Elaine | 14,900 | 10 | Semiannually | ||
| George | 21,900 | 6 | Annually | ||
| Kramer | 17,900 | 8 | Annually | ||
Required:
1-a. Calculate the future value at the end of five years. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
1-b. Who has the greatest investment accumulation?
Determine the present value of the following single amounts.
Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
You would like to start saving for retirement. Assuming you are now 20 years old and want to retire at age 50, you have 30 years to watch your investment grow. You decide to invest in the stock market, which has earned about 8% per year over the past 80 years and is expected to continue at this rate. You decide to invest $1,000 at the end of each year for the next 30 years.
Required:
Calculate how much your accumulated investment is expected to be in 30 years.
Note: Use tables, Excel, or a financial calculator. Round your answer to 2 decimal places. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options:
- Pay $25,000 today for the car.
- Pay $2,000 at the end of each quarter for three years.
Required:
1-a. Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value.
1-b. Which option gives him the lower cost?
Hard Hat Company is in the process of purchasing several large pieces of equipment from Machine Corporation. Several financing alternatives have been offered by Machine:
- Pay $1,080,000 in cash immediately.
- Pay $400,000 immediately and the remainder in 10 annual installments of $82,000, with the first installment due in one year.
- Make 10 annual installments of $140,000 with the first payment due immediately.
- Make one lump-sum payment of $1,610,000 five years from date of purchase.
Required:
Determine the best alternative for Hard Hat, assuming that Hard Hat can borrow funds at a(n) 8% interest rate.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Helga is considering the purchase of a small restaurant. The purchase price listed by the seller is $920,000. Helga has used past financial information to estimate that the net cash flows (cash inflows less cash outflows) generated by the restaurant would be as follows:
| Years | Amount |
| 1-6 | $ 92,000 |
| 7 | 82,000 |
| 8 | 72,000 |
| 9 | 62,000 |
| 10 | 52,000 |
If purchased, the restaurant would be held for 10 years and then sold for an estimated $820,000.
Required:
Determine the present value, assuming that Helga desires a 10% rate of return on this investment. (Assume that all cash flows occur at the end of the year.)
Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corporation. The machine can be used for 10 years and then sold for $24,000 at the end of its useful life. Lollie has presented Kiddy with the following options:
- Buy machine. The machine could be purchased for $174,000 in cash. All maintenance costs, which approximate $19,000 per year, would be paid by Kiddy.
- Lease machine. The machine could be leased for a 10-year period for an annual lease payment of $39,000 with the first payment due immediately. All maintenance costs will be paid for by the Lollie Corporation and the machine will revert back to Lollie at the end of the 10-year period.
Required:
Assuming that a 8% interest rate properly reflects the time value of money in this situation and that all maintenance costs are paid at the end of each year, determine which option Kiddy should choose. Ignore income tax considerations.
Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
und your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)