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# Annuity

### Bonds and Issue Price

On January 1, 2007 Kiner Co. issued five-year bonds with a face value of \$400,000 and a stated interest rate of 12% payable semiannually on July 1 and January 1. The bonds were sold to yield 10%. Present value table factors are: Present value of 1 for 5 periods at 10% .62092 Present value of 1 for 5 periods at 12% .56743

### Finding the Present Value of an Annuity

You have \$2000 to by a car, but want something more expensive. The bank will give you a loan @ 8.25% APR compounded monthly, which should be paid off in 3 years. But, the bank says my maximum monthly payment can be no more than \$250.00. Closing costs are 8% of the loan amount. What is the most expensive car you can buy?

### Present and future value

In computing your answers to the cases below, you can round your answer to the nearest dollar. Present value tables are provided on the next page. Case A: On January 2, 2004, Notson Company loaned \$50,000 to Pine Company. The terms of this loan agreement stipulate that Pine is to make 5 equal annual payments to Notson at 1

### Life insurance calculations

Sue and Tom Wright are assistant professors at the local university. They each take home about \$40,000 per year after taxes. Sue is 37 years of age, and Tom is 35. Their two children, Mike and Karen, are 13 and 11. Were either one to die, they estimate that the remaining family members would need about 75% of the present com

### NPV of Projects, Expansion Option

Your company is considering the following project and has a cost of capital of 15%. A. What is the Net Present Value of the initial project? B. What is the Net Present Value of the expansion option? C. Would you recommend the project? Why? Initial Project: Cost: \$50,000 ATCFs of \$9,000 each year for five years.

### Present value computation

(Computation of Present Value) Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods. (a) \$30,000 receivable at the end of each period for 8 periods compounded at 12%. (b) \$30,000 payments to be made at the end of each period for 16 periods

### Compute the net present value of the annuity if the risk free investment is 5%

You have been totally disabled and you have been offered a settlement. In addition to your lifetime medical expenses you will receive a payment of 2,500,000 today or you can receive a lifetime annuity of 150,000 a year for the rest of your life. Using a life expectancy of 82 for men and 86 for women and your age of 32, compute

### Future Value

Find the future vales of the following ordinary annuities: a. FV of \$400 paid each 6 months for 5 years at a nominal rate of 12 %, compounded semiannually. b: FV of \$200 paid each 3 months for 5 years at a nominal rate of 12%, compounded quarterly c. These annuities receive the same amount of cash during the 5- year period

### Bond valuations based on Yields

Consider three bonds with 8 percent coupon rates, all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. a. What will happen to the price of each bond if their yields increase to 9 percent?

### Annuity Factor in Funds and PPP

With the following statistics make calculations and analysis. Giving attention to determination of the annuity factor. Transitional fund needed - \$30,000 100% needed of the present take home pay which is \$72,000 + \$36,000 after 2 years. Tax rate is 30% Survivors benefits, including monies for kids are \$2500 Current investmen

### Finance Questions - compounded annually investments

1. You just won the lottery and want to put some money away for your child's college education. College will cost \$65,000 in 18 years. You can earn 8% compounded annually. How much do you need to invest? 2. You just won the lottery. You and your heirs will receive \$25,000 per year forever, beginning one year from now. What

### Present Value and Bond Liability

Computation of present value and bond liability. See attached file for full problem description.

### Divestiture of Land and Taxation Strategies

Mr. Tucker owns investment land (\$690,000 FMV and \$228,000 adjusted basis) that he is interested in selling. Several prospective purchasers have offered to pay cash, but Mr. Tucker wants to avoid recognizing this entire gain in the year of sale. Accordingly, he is considering selling the land to the Tucker Family Corporation in

### Economic Evaluation of Machine A

Machine A costs \$20,000 , has a zero salvage value at any time, and has an associated labor cost pf \$1.14 for each piece produced on it. Machine B costs \$36,000 , has zero salvage value at any time , and has an associated labor cost of \$0.85.Neither machine can be used except to produce the product described.If the interest rat

### Calculations of Interest Rates

A bank consultant suggested that Sheila and Ed offer one of their best customers, Shanghai Winters, a 3.5% interest rate rather than the 8.0% going rate on a \$70,000 five-year note receivable. Sheila and Ed would like you to explain the rationale behind the recommendation. Ed would also like to know what the interest rate would

### Payback Method, Uncertain Expected Cash Flows

1) Payback Method The company paid \$50,000 cash for a capital investment. The company expects the investment to generate net cash inflows of \$8,400 per year. What is the payback period of this investment? 2) Uncertain Expected Cash Flows The company is considering an investment that costs \$785,000 today and has a salvag

1. Which of the following project evaluation techniques does not take into consideration the time value of money: a. NPV b. IRR c. PI d. Payback 2. In order to accept a project using the NPV evaluation technique, the NPV must be: a. Greater than the discount rate b. Positive c. Great

### Time Value of Money Questions

6) A 10-year annual annuity due with the first payment occurring at date t=7 has a current value of \$50 000. If the discount rate is 13% per year, what is the annuity payment amount? 7) You currently owe a finance company \$6700 that you would like to pay back over the next 24 months (payments will be made at the end of the mo

### Annuity Calculation

You are considering an investment in a 40-year security. The security will pay \$25 a year at the end of each of the first three years. The security will then pay \$30 a year at the end of each of the next 20 years. The nominal interest rate is assumed to be 8 percent, and the current price (present value) of the security is \$360.

### College Education Savings

John and Barbara Roberts are starting to save for their daughter's college education. - Assume that today's date is September 1, 1998. é College costs are currently \$10,000 a year and are expected to increase at a rate equal to 6 percent per year for the foreseeable future. All college payments are due at the beginning of

### Pime Value Concepts Applied to Solve Business Problems

Answer the following questions related to Derek Lee Inc. : (a) Derek Lee Inc. has \$572,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides \$80,000 at the end of each year for 12 years, and the other is to receive a single lump sum payment of \$1,900,000 at the end

### Financial Plan to Retire to the Bahamas

You are 35 years old and are considering your retirement needs. you expect to retire at age 65 and your actuarial tables suggest that you will live to be 100. you want to move to the Bahamas whey you retire. you estimate that it will cost you 300,000 to make the move (on your 65th birthday) and that your living expenses will be

### Personal Finance in Retirement

Your uncle has approached you with a personal finance decision. He tells you that he is currently eligible for a monthly pension benefit of \$5,231 beginning January 2017. Alternatively, he can start drawing early monthly benefits of \$3400 in January 2007 (a 35% reduction for a 10 year early start). You tell him you are ta

### Present Value Lease: Calculate Annual Payments for Robotics of Beverly Hills and Leases R Us, Inc.

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

### Compare two annuities; Virginia Medical Company machine replacement

See attached file for proper format. Please provide the process and the answers to the problewms. 1. Which of the following two annuities would you prefer to receive (based on sound financial reasoning) if the appropriate discount rate is 12 percent? 0 0 0 600 600 600 600 |-

### Financial Analysis

FINANCIAL ANALYSIS 1. My firm is considering replacing old equipment with a new, more efficient model. The old equipment bought three years ago for \$100,000, has a 5 - year MACRS life and can be sold for \$50,000 or used for three more years when its resale value will be zero. The new equipment will cost \$210,000, will have

### Description of a process targeted for improvement

I need a description of the process targeted for improvement when the process will involve training in the newest technology available.

### Lottery winner - which do you choose?

You just won the lottery! You have a choice now of \$5,000,000 now (cash value), or \$425,000 a year for 30 years. You are a pretty aggressive investor and feel confident that you can get a 9% yearly return on your investments in the stock market. From a purely financial standpoint, which do you choose?

### Financial Calculator Inputs

1. John is planning to use student loans to pay for graduate school tuition starting next year. His tuition will be \$25,000 a year for three years. The loan program has an 12% annual rate of interest. A. If John borrows to pay all of his tuition, how much will he owe at the end of three years, assuming annual compounding? B

### Student loan calculations

(See attached file for full problem description) 1. John is planning to use student loans to pay for graduate school tuition starting next year. His tuition will be \$25,000 a year for three years. The loan program has a 12% annual rate of interest. A. If John borrows to pay all of his tuition, how much will he owe at the