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# Annuity

### Present Value of Funding a Future Annual Annuity

P3-28. Determine the annual payment required to fund a future annual annuity of \$12,000 per year. You will fund this future liability over the next five years, with the first payment to occur one year from today. The future \$12,000 liability will last for four years, with the first payment to occur seven years from today. If you

### Equivalent Annual Cost: The Oklahoma Electric Company (OEC) is currently evaluating two different options to control the emissions from their coal-burning electric generation facility in Dewar.

The Oklahoma Electric Company (OEC) is currently evaluating two different options to control the emissions from their coal-burning electric generation facility in Dewar. A filtration system will cost \$12 million to install and \$700,000 per year to operate. The filtration system, which will have a salvage value of zero at the end

### End-of-year cash flow

P3-15. For the following questions, assume an end-of-year cash flow of \$250 and a 10 percent discount rate. a. What is the present value of a single cash flow? b. What is the present value of a 5-year annuity? c. What is the present value of a 10-year annuity? d. What is the present value of a 100-year annuity? e. What is

### Assume that you just won the state lottery.

P3-14. Assume that you just won the state lottery. Your prize can be taken either in the form of \$40,000 at the end of each of the next 25 years (i.e., \$1 million over 25 years) or as a lump sum of \$500,000 paid immediately. a. If you expect to be able to earn 5 percent annually on your investments over the next 25 years, ign

### Fisher Effect, Time Value of Money

Please see the attached file. 1) Fisher Effect Year Expected rate of inflation Observed rate of inflation Expected real interest rate 2008 5% XX 1.5% 2007 4% 3.5% 3% a. Define the Fisher Effect and explain why expected inflation should have an impact on the nominal rate of interest? b. Today is January 1, 2008. What

### NPV and IRR : explained

NPV/IRR. Consider projects A and B. Cash Flows, Dollars Project C0 C1 C2 NPV at 10% A -30,000 21,000 21,000 +\$6,446 B -50,000 33,000 33,000 + 7,273 Calculate IRRs for A and B. Which project does the IRR rule suggest is best? Which project is really best?

### Comprehensive Depreciation Computation - Sheryl Crow Corporation

(Comprehensive Depreciation Computations) Sheryl Crow Corporation, a manufacturer of steel products, began operations on October 1, 2006. The accounting department of Crow has started the fixed-asset and depreciation schedule presented on page 563. You have been asked to assist in completing this schedule. In addition to ascert

### Bond Price, Future Value of Investment, Annuity

1. Today is t=0. Consider the following bonds in which the first coupon payment (if any) will begin in t=1. Bond.....................Coupon Rate (Annual payment).................Maturity (years) A..............................................0%....................................................3 B...................

### Present Value of an Annuity

(Present value of an annuity) What is the present value of the following annuities? a. \$2,500 a year for 10 years discounted back to the present at 7 percent b. \$70 a year for 3 years discounted back to the present at 3 percent c. \$280 a year for 7 years discounted back to the present at 6 percent d. \$500 a year for 10

### Compound Annuity - Streams of Payments

(Compound annuity) What is the accumulated sum of each of the following streams of payments? a. \$500 a year for 10 years compounded annually at 5 percent b. \$100 a year for 5 years compounded annually at 10 percent c. \$35 a year for 7 years compounded annually at 7 percent d. \$25 a year for 3 years compounded annually a

### PV of uncertain cash flows

Question and answers are provided: But, Please Use a BA II calculator to solve. I need to learn how to solve with a BA II financial calculator. please list, step by step instructions. See Below: 9. PV of uncertain cash flows . A project with a 3-year life has the following probability distributions for possible end-o

### What's the future value of a 7 percent, 5-year ordinary annuity that pays \$300 each year?

Future value: annuity versus annuity due What's the future value of a 7 percent, 5-year ordinary annuity that pays \$300 each year? If this were an annuity due, what would its future value be?

### Saving for Retirement

1. Assume that you are 40 years old and wish to retire at age 65. You expect to be able to average a 6% annual rate of interest on your savings over your lifetime (both prior to retirement and after retirement). You would like to save enough money to provide \$8,000 per year beginning at age 66 in retirement income to supplement

### How long will it take \$10,000 to reach \$50,000 if it earns 10% interest compounded semiannually?

Give appropriate solutions to the attached email. 1. How long will it take \$10,000 to reach \$50,000 if it earns 10% interest compounded semiannually? a.) 17 years b.) 33 years c.) 16.5 years d.) 8.5 years 2. You require an 8% annual return on all investments. You will receive \$1,000, \$2,000, and \$3,000 respectiv

### Amortizing Loan

38. Amortizing Loan. 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 p

### High Dividends vs. High Capital Gains

Question 1 Discuss a real world decision that you have analyzed (like a capital budgeting decision or security investment). Explain how you might now go about setting up the "investment decision." Question 2 If you were to purchase a stock, would you be looking for one that paid high dividends or high capital gains?

### Questions about Present and Future Value

1. Future Value If you invest \$9,000 today, how much will you have: a. In 2 years at 9 percent? b. In 7 years at 12 percent? c. In 25 years at 14 percent? d. In 25 years at 14 percent (compounded semiannually) 2. Present Value How much would you have to invest today to receive: a. \$15,000 in 8 years at 10 percent? b.

### Dr. Harold Wolf of Medical Research Corporation (MRC) was thrilled with the responses he had received from drug companies for his latest discovery

Dr. Harold Wolf of Medical Research Corporation (MRC) was thrilled with the responses he had received from drug companies for his latest discovery, a unique electronic stimulator that reduces the pain from arthritis. The process had yet to pass regoros Federal Drug Administration (FDA) testing and was still in the early stages o

### Return on Investing \$9,000 Today

Complete the following Problems from Foundations of Financial Management (11th ed.) Stanley B. Block and Geoffrey A. Hirt Irwin/McGraw-Hill, 2005 Burr Ridge, IL Chapter 9 3. If you invest \$9,000 today, how much will you have: a. In 2 years at 9 percent? b. In 7 years at 12 percent? c. In 25 years at 14 percen

### Stephanie must decide between two alternatives for the weekend

See attachment. Stephanie must decide between two alternatives for the weekend: babysitting or yard work. If she baby sits, she will receive \$40 and will incur \$15 in food and snack costs. If she does yard work, she will receive \$40 and will incur \$3 in lawn mower gas and oil costs and \$5 in snack costs. The amount to be rece

### Determinants of Interest Rates Questions

1. Calculate the present value of \$5,000 received five years from today if your investments pay: a. 6 percent compounded annually b. 8 percent compounded annually c. 10 percent compounded annually d. 10 percent compounded semi-annually e. 10 percent compounded quarterly What do your answers to these questions tell you

### Annual Cash Flow Discount Rate Estimated Values

See the attached file. 1.) If Company A is acquiring Company B, how do I complete the following table? Table 1 Net Annual Cash Flow Discount Rate Estimated Value Company A \$42,274 0.09 Company B \$13,658 0.12 "Before A+B" Benefits -------------------------- ---------------------- --------------------- Less Curren

### Compound Interest

Here are the exercises: Can you also briefly explain why with 2-3 sentences, Thank you I am trying to better understand it. 1. (Compound interest) To what amount will the following investments accumulate? Why you think this way? a. \$5,000 invested for 10 years at 10 percent compounded annually b. \$8,000 invested for 7 years

### Compute the payback period. Is this a good measure of profitability? 2. Compute the NPV. Should Simon accept the proposal? Why or why not? 3. Compute the IRR. How does this compare with the required rate of return? Should Simon accept the proposal? 4. Using the accounting rate of return model, compute the rate of return on the initial investment.

Bob's Big Burgers is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the equipment (including installation of special windows and driveway modifications) is \$30,000. Jenna Simon, manager of Bob's, expects the drive-through operation to increase a

### The present value of a stream of equal cash flows occurring at regular intervals of time can be computed using a financial calculator. In this case, the amount of each cash

1.The present value of a stream of equal cash flows occurring at regular intervals of time can be computed using a financial calculator. In this case, the amount of each cash flow is input as the: a. present value. b. payment. c. future value. d. number of time periods. e. interest rate per period. 2. Which one

### T-F questions about taxation of corporations and partnerships

Please answer the attached questions with True or False. 1. Unreasonable compensation can be reclassified as a nondeductible dividend payment to the shareholder. 2. The corporation cannot deduct as a business expense interest payments to creditors who are also shareholders. 3. The IRS determines that compensation i

### Financial Management

1)Rocking Horse Corporation reported net income for 2004 of \$100,000, sales of \$300,000, expenses (excluding depreciation) of \$150,000, and depreciation expense of \$50,000. The company's accounts receivable balance increased by \$25,000 during the year and its accounts payable balance remained the same. The company's change in

### P4-51

P4-51 Interest rate for an annuity Anna Waldheim was seriously injured in an industrial accident. She sued the responsible parties and was awarded a judgment of \$2,000,000. Today, she and her attorney are attending a settlement conference with the defendants. The defendants have made an initial offer of \$156,000 per year for

### P4-37 Annuities and Compounding

P4-37 Annuities and compounding Janet Boyle intends to deposit \$300 per year in a credit union for the next 10 years, and the credit union pays an annual interest rate of 8%. a. Determine the future value that Janet will have at the end of 10 years, given that end-of-period deposits are made and no interest is withdrawn, if (1)

### Forbes Company, Rice Corporation, Dolan Co.

Just wanted verification to see if I did anything wrong for the following questions. file attached. 1. Forbes Company paid \$7,200 on June 1, 2004 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2004 adjusting entry is a. debit Insurance Expense and credit Prepaid In