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How to calulate NPV

What is the NPV of a project that is expected to pay $10,000 a year for 7 years if the initial investment is $40,000 and the required return is 15%.

Future Value of an annuity

For Bill's tuition expenses, his rich uncle has agreed to loan him $8,000 as he begins college, and increase it by $2,000 for the remaining 3 years (amounts $10,000, $12,000 and $14,000). Being a businessman, his uncle would at least like to have 5% on his money. Bill is to begin paying back the amount immediately after graduati

Retained earnings , rate of return, present value

Use the information, below, to answer questions 1 and 2. Selected items from the financial statements of ABC Company for the year 20X1: Retained earnings, 01/01/X1 ?? Total assets at 12/31/X1 $950 Net Income, year ended 12/31/ X1 110 Retained earnings 12/31/X1 ?? Total Liabilities at 12/31/X1 400 Common stock at 12/31/X1

Business Finance Review Questions

What are the monthly mortgage payments on a 30-year loan for $150,000 at 12%? You have two assets in your portfolio: a stock mutual fund with a beta of 1.20 and U.S. Treasury securities (assume they are risk free). What is the beta for your portfolio if 40% of your funds are invested in the treasury securities?

Equivalent Annual Method

When trying to determine between two seperate projects I understand that the EAM is the best tool. However I am not sure how to apply this. I need to know in a step by step format how to calculate this and further how to use. For example: short-lived light bulbs last 2 years, cost is $5 and use of electricity is $5 ann

Amount of the Equal Annual Deposit

Astros Co wants to accumulate $2,000,000 by 10/1/10. To achieve this goal, Astros Co will make the first of 6 equal annual deposits on 10/1/05. The deposits will be placed into a fund that earns interest at 10% **Compute the: 1) amount of the equal annual deposit 2) balance of the account at 10/1/08, immediately after

Annuities: Astros's homerun hitting contest; evaluation the prize choices

Astros Co is sponsoring a homerun hitting contest, with the winner receiving a choice between two equivalent prizes. Prize 1 is a lump-sum amount to be paid on 10/1/05. Prize 2 pays a total of $90,000,000 as follows: $5,000,000 per year starting on 10/1/06 with the final payment made on 10/1/14, plus bonus payments of $15,00

NPV and annuities: how much must be saved to plan for retirement

Assume that you are planning on how much you need to save for retirement. You expect to live for 30 years in retirement and would like to spend $100,000 (in real terms) per year, while leaving a $1,000,000 bequest to the International Red Cross. You are 35 years away from retirement. How much do you need to save at the end of

Several Problems

37. Consider a 4-year amortizing loan. You borrow $1,000 initially, and repay it in four equal annual year-end payments a. If the interest rate is 8 percent, show that the annual payment is $301.92. b. Fill in the following table, which shows how much of each payment is interest versus principal repayment (that is, amortization


If a company wants to have $100,000 in a contingency fund 10 years from now, the amount the company must deposit each year in years 1 through 5, at an interest rate of 10% per year, is closest to? A. Less than $8,000 B. $8,420 C. $9,340 D. MORE THAN $10,000

Calculation of Annuity

A manufacturing company wants to have $100,000 available in 5 years to replace a production line. The amount of money that would have to be deposited each year at an interest rate of 10% per year would be closest to? a. 12,380 b. 13,380 c. 16,380 d. 26,380

Finance Problems

1. If you invest $100 at an interest rate of 15 percent, how much will you have at the end of 8 years? 2. An investment of $232 will produce $312.18 in 2 years. What is the annual interest rate? 3. You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. a. Is this a good deal if the discount ra

Present Value Lease Calculating Annual Lease Payments

Leases R Us, Inc. (LRU) has been contracted by Robotics of Beverly Hills (RBH) to provide lease financing for a machine that would assist in automating a large part of their current assembly line. Annual lease payments will start at the beginning of each year. The purchase price of this machine is $200,000, and it will be leased

Discounted Cash Flow Valuation

Please check my computations to the following questions on the attached spreadsheet. I know that my answers for # 3 are wrong and that the correct answers are $4,167.62, $ 4,313.71, and $ 5,001.15 but I can't figure out what I'm doing wrong. I don't know if my other answers are correct or not. Question 3 - Future Value and Mu

The answer to various accounting questions

BE2-4 Becky Sherrick's regular hourly wage rate is $14, and she receives an hourly rate of $21 for work in excess of 40 hours. During a January pay period, Becky works 45 hours. Becky's federal income tax withholding is $95, her FICA tax withheld is $53.20, and she has no voluntary deductions. Compute Becky Sherrick's gross e

The Lottery: Calculating Present Value

Question: The $40 million lottery payment that you just won actually pays $2 million per year for 20 years. If the discount rate is 8%, and the first payment comes in 1 year, what is the present value of the winnings? What if the first payment comes immediately?


Cathy is saving for her retirement by putting $325 each month into an ordinary annuity. If the annuity is expected to pay an annual interest rate of 8.5%, how much will she save for her retirement in 30 years?

Capital structure and dividend policy

Please help with the following problem. Andahl Corporation stock, of which you own 500 shares, will pay a $2-per-share dividend one year from today. Two years from now Andahl will close its doors; stockholders will receive liquidating dividends of $17.5375 per share. The required rate on return on Andahl stock is 15 percent.

Future Value

A couple is planning for the education of their two children. They plan to invest the same amount of money at the end of each of the next 16 years. The first contribution will be made at the end of the year and the final contribution will be made at the time the oldest child enters college. The money will be invested in sec

Important information about Basic financial analysis

You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account. How much money will you r

Multiple Choice - Basic Portfolio Problems

Multiple Choice- Annuities ________________________________________ Solution The future value of a lump sum at the end of five years is $1,000. The nominal interest rate is 10 percent and interest is compounded semiannually. Which of the following statements is most correct? d. Both statements b and c are correct. e.

Multiple Choice- Annuities

The future value of a lump sum at the end of five years is $1,000. The nominal interest rate is 10 percent and interest is compounded semiannually. Which of the following statements is most correct? a. The present value of the $1,000 is greater if interest is compounded monthly rather than semiannually. b. The effective a

Future Value / Present Value, Interest and Annuity Tables

1. If you borrow $15,618 and are required to pay the loan back in 7 equal annual installments of $300. What is the interest rate assocated with this loan? 2. Your rich uncle has offered you a choice of one of the three following alternatives. Which one would you take? a) $10,000 now b) $2000 a year for 8 years -equal inv


1. The future value of a $500 ordinary annuity received for three years is $________, assuming an investment rate of 10%. a. 1,655.00 b. 665.50 c. 1,820.50 d. 335.65 2. With an interest rate of 9 percent, your investment would double in about a. 4 years. b. 6 years. c. 8 years. d. 10 years. 3. An ordinary annuity

Basic Finance: Annuities, Interest Rates, Rates of Return

1. Determine the future value of an annuity that pays $5,000 at the end of the next 11 years. Similar securities pay an interest rate of 7%. 2. How much money would you be willing to pay in order to receive $800,000 40 years from today? Assume that your required rate of return on investments is 8% compounded semiannually.

Basic Finance: Compound Interest, Rate of Return, Annuities

1. Today you borrow $80,000 to finance the purchase of your new sports car. Interest will be 5% compounded monthly. Payments will be made at the beginning of the month. You will repay the loan over 4 years. How much will the payments be? 2 If you borrow $100 and pay back $3600 in 5 years, what annual interest rate are you pay