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Annuity

Budgeting & Forecasting

You have just won the lottery and just elected to receive $50,000 per year for 20 years. Assume that a 4 percent interest rate is used to evaluate the annuity and that you receive each payment at the beginning of the year. a) What is the present value of the lottery? b) How much interest is earned on the present value to make

Finance: Cash management, value of bonds, compute bond price, annuity payment

1. A company has collection centers across the country to speed up collections. The company also makes its disbursements from remote disbursement centers. The collection time has been reduced by two days and disbursement time increased by one day because of these policies. Excess funds are being invested in short-term instrument

Time Value of Money, opportunity cost of capital, interest rate factor

Please see the attached file for details. A. Suppose the opportunity cost of capital is 6% and you have just won a $2 million lottery that entitles you to $200,000 at the end of each year for the next 10 years. 1. What is the minimum lump sum cash payment you would be willing to take now in lieu of the 10-year annuity?

Calculating the annual amount of scholarship

The school of engineering will be given a gift of $50,000 to be used for a scholarship each year. What amount can be given to a student each year beginning when the gift is given if the scholarship is to be given every year forever. The interest rate is expected to be 10% for the first 10 years, and then it is expected to drop t

F-16: Compute net present value for each piece of equipment; evaluate investment

Please see the attachment. A company is trying to decide which of two new product lines to introduce in the coming year. The company requires a 12% return on investment. The predicted revenue and cost data for each product line follows (see attachment). The company has a 30% tax rate and it uses the straight-line depreciat

Future Value of Lump Sum and Ordinary Annuity

Mary and Joe would like to save up $10,000 by the end of 3 years from now to buy new furniture for their home. They currently have $1,500. in a saving account set aside for the furniture. They would like to make 3 equal year end deposit to this savings account to pay for the furniture when they purchase it three years from now

Annuities, Perpetuity, Savings Account, Bonds

30. Your brother has offered to give you $100, starting next year, and after that growing at 3% for the next 20 years. You would like to calculate the value of this offer by calculating how much money you would need to deposit in the local bank so that the account will generate the same cash flows as he is offering you. Your

Highly Profitable Company Operations

1. The CEO of a highly profitable company, noticing that the excess cash not needed to fund business operations has accumulated in a company bank account that pays no interest, contemplates declaring and paying a cash dividend to common shareholders before year's end. The likely effect of paying the dividend would be to A. ha

Intermediate accounting

Sandy Shores inc plans to make four annual deposits of 5000.00 each to a special fund at the beach museum. The fund assets will be invested and the expected rate of return will be 8%. Using the appropriate tabels determine how much will be accumulated in teh fund on December 31, 2012 under each of the following situations: A

Determining Present Value of an Annuity: Example Problems

Using the appropriate PV Table and assuming a 12% annual interest rate, determine the present value on December 31, 2009 of a five period annual annuity of 10000 under each of the following situations: a. The first payment is received on December 31, 2010, and interest is compounded annually. b. The first payment is receiv

NPV of an Investment with Two Different Annuities

How can I tell when to do a PV calculation and when to do a FV calculation? How do you calculate NPV of an investment with two different annuities? How do you calculate the NPV when the purchase has a salvage value?

Financial Management

You are considering investing in a bank account that pays a nominal annual rate of 6.9 percent, compounded monthly. If you invest $3,000 at the end of each month, how many months will it take for your account to grow to $150,000?

Account growth

Considering investing in a bank account that pays a nominal annual rate of 6.7 percent, compounded monthly. If you invest$3,200 at the end of each month, how many months will it take for your account to grow to $150,000?

Monthly and Annual Payments

Please address the following questions: 1. What is the future value of a 5 year ordinary annuity with annual payments of $200 evaluated at a 15% interest rate? 2. You have just taken out an instalment loan for $100,000. Assume that the loan will be repaid in 12 equal monthly instalments of $9,456 and the first monthly pa

Effective Annual Rate Investment

An investment instrument pays $1.35 million at the end of each of the next ten years. An investor has an alternative investment with the same amount of risk that will pay interest at 8.5 percent, compounded quartely. What effective rate should you receive in this investment? How much should you pay for the mortgage instru

Annuity

Your aunt has $350,000 invested at 5.5%, and she now wants to retire. She wants to withdraw $45,000 at the beginning of each year, beginning immediately. She also wants to have $50,000 left to give you when she ceases to withdraw funds from the account. For how many years can she make the $45,000 withdrawals and still have $50,0

Annuity

Suppose you just won the state lottery, and you have a choice between receiving $2,075,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

Annuity

Your uncle is about to retire, and he wants to buy an annuity that will provide him with $73,000 of income a year for 20 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?

Annuity case

Suppose you just won the state lottery, and you have a choice between receiving $2,075,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.

Annuity

Sam was injured in an accident, and the insurance company has offered him the choice of $49,000 per year for 15 years, with the first payment being made today, or a lump sum. If a fair return is 7.5%, how large must the lump sum be to leave him as well off financially as with the annuity?

Interest Rates on Annuities

Determine the annual interest rate that is needed for the following annuities to accumulate to $25,000. Assume payments are made at the end of each period. 1. Quarterly payments of $1,864 for 3 years, interest compounded quarterly. 2. Annual payments of $4,095 for 5 years, interest, compounded annually 3. Semiannual paym

Present Value of an Annuity Computation

Jean will receive $8,500 per year for the next 15 years from her trust. If a 7% interest rate is applied, what is the current value of the future payments? Describe how you solved this problem, including which table (for example, present value and future value) was used and why.

Lumpsum or Annuity Option

I need help determining which option would be the best choice. You have won a lottery and are given a choice on how to collect your winning. You can choice $1,000,000 lump sum or you can choose $80,000 ordinary annuity for the next 30 years. If you earn an interest rate of 8% on your funds, which of the two options should yo

Insurance Planning

Sue and Tom Wright are assistant professors at the local university. They each take home about $42,000 per year after taxes. Sue is 37 years of age, and Tom is 35. Their two children, Mike and Karen, are 11 and 9. Were either one to die, they estimate that the remaining family members would need about 75% of the present combi

General Accounting

Use the following information for questions 1 and 2. The following information was available from the inventory records of Rich Company for January: Units Unit Cost Total Cost Balance at January 1 3,000 $9.77 $29,310 Purchases: January 6 2,000 10.30 20,600 January 26 2,700 10.71 28,917 Sales: January

Comparing Investments

A 2-year $1,000 par zero-coupon bond is currently priced at $819.00. A 2-year $1,000 annuity is currently priced at $1,712.52. Assume: a. the pure expectations theory of interest rates holds, b. neither bond has any default risk, maturity premium, or liquidity premium, and c. you can purchase partial bonds. If you want to in