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# Annuity

### 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

### Retirement: Annual deposits beginning on 36th birthday

A friend is celebrating his 35th birthday today and wants to start saving for his retirement at age 65. He wants to be able to withdraw \$10,000 from his savings account on each birthday for 10 years following his retirement; the first withdrawal will be on his 66th birthday. He wants to invest his money in the local savings bank

### 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

### Annual worth of a dam

The first cost of a fairly large flood control dam is expected to be \$5 million. The maintenance cost will be \$60,000 per year, and a \$100,000 outlay will be required every 5 years. If the dam is expected to last forever, it's equivalent annual worth at an interest rate of 10% per year is closest to? A. \$-576,380 B. \$-591,58

### INTEREST RATES

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

### Relationship between future value and present value..

1. How is the future value (Appendix A) related to the present value of a single sum (Appendix B)? 2. 2. How is the present value of a single sum (Appendix A) related to the present value of an annuity (Appendix D)?

### 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

### Finance: PV and FV calculations for a cruise, savings account and new boat purchase

Time Value of Money-An Application Please answer the following questions. SHOW ALL WORK AND EXPLAIN EACH STEP CAREFULLY. 1. You would like to take a cruise in six years. The cruise currently costs \$4,250. You expect the price to increase by 4% annually. You can earn 5% on your savings. How much do you need to save at the e

### 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

### Discussion Questions - measure of profitability, present value of an annuity, upper limit for the credit period

Please discuss: 1. Which is a more meaningful measure of profitability for a firm, Return on Assets or Return on Equity? Why? 2. There are three factors that affect the present value of an annuity. Explain what these three factors are and discuss how an increase in each will impact the present value of the annuity. 3. W

### Nominal,effective interest rates, monthly payments

Questions about nominal and effective interest rates, monthly payments, refinancing fees. (See attached file for full problem description)

### Several Problems: Valuing Delayed Annuities; Amortizing Loan; Annuity Value; Interest Rate Risk

34. Valuing Delayed Annuities. Suppose that you will receive annual payments of \$10,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5 percent, what is the present value of this stream of payments? 36. Amortizing Loan. You take out a 30-year \$100,000 mortgage loan with

### 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

### Present Value Lease Problem-Calculating Annual 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

### 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?

### Amortizing Help

Please help with the attached problem. Please include formulas and steps to solution. Amortizing Loan. Consider a 4-year amortizing loan. You borrow \$1,000 initially, and repay it in four equal annual year-end payments. c) Show that the loan balance after 1 year is equal to the year-end payment of \$301.92 times the 3-yea

### Retirement Savings Problem

Please help with this problem (also attached): Retirement Savings. You believe you will need to have saved \$500,000 by the time you retire in 40 years in order to live comfortably. If the interest rate is 6 percent per year, how much must you save each year to meet your retirement goal?

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 attached table, which shows how much of each payment is interest versus principal repayment (tha

### Required annuity payments

You are saving for the college education of your two children. One child will enter college in 5 years, while the other child will enter college in 7 years. College costs are currently \$10,000 per year and are expected to grow at a rate of 5 percent per year. All college costs are paid at the beginning of the year. You assume

### Annuity

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 Questions: Stock's beta, R2 for a stock and a portfolio, present value of an ordinary annuity Please see attached.

1) Stock A has a beta = 0.8, while Stock B has a beta = 1.6. Which of the following statements is most correct? a. Stock B's required return is double that of Stock A's. b. An equally weighted portfolio of Stock A and Stock B will have a beta less than 1.2. c. If market participants become more risk averse, the required re

### 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.