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# Various time value of money problems

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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 Multiple Cash Flows
Officer, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? What is the future value at a discount rate of 11 percent? At 24 percent?

Year Cash Flow
1 \$ 500
2 900
3 1100
4 1300

Question 4 - Calculating Annuity Present Value
An investment offers \$ 6,000 per year for 15 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever?

Question 7 - Calculating Annuity Values
If you deposit \$ 2,000 at the end of each of the next 20 years into an account paying 7.5 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years?

Question 19 - EAR versus APR
Ricky Ripov's Pawn Shop charges an interest rate of 20 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. What rate should the shop report? What is the effective annual rate?

Question 20 - Calculating Loan Payments
You want to buys a new sports coupe for \$ 52,350, and the finance office at the dealership has quoted you an 8.6 percent APR loan for 60 months to buy the car. What will your monthly payments be? What is the effective annual rate on this loan?

Question 24 - Calculating Annuity Future Values
You are to make monthly deposits of \$200 into a retirement account that pays 11 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years?

Question 55 - Amortization with Equal Payments
Prepare an amortization schedule for a three-year loan of \$ 60,000. The interest rate is 11 percent per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan?

#### Solution Preview

I have corrected your answer 3. The first payment is to be compounded for 3 years. You were compounding ...

#### Solution Summary

The solution has various problems in time value of money relating to annuities, future value and loan payments

\$2.19

## Create a Risk Template by listing those risks that you think are appropriate for Project X

You work for a major defense contractor. Your company prepared and submitted a bid for a recent Department of Defense RFP, entitled Automated Mobile Defense System (AMDS). You have been assigned to lead Project X, which will design, develop, test, demonstrate and deploy 10 AMDS units to a location to be determined by the DoD assuming a successful demonstration. This project is expected to take at least 5 years to complete at a cost of \$1.5 billion. If you are successful and deliver a quality product on time and within budget, the DoD will order 150 more AMDS units at a price of \$10 million per unit. The goal of Project X is to develop a defense system to protect major and strategic cities within the US in the event of a missile attack from a hostile nation. It is to be a redundant system; the last in a series of defensive weapons to be used only in the event that all other defensive systems have failed; when enemy ABMs are approaching the US and only AMDS is left to take them down.

The conceptual design for the AMDS that your company submitted in response to the RFP consists of a mobile housing unit (MHU) containing 20 anti-ballistic missiles (ABMs) based on a radically new design; an anti-missile control computer (AMCC) used to automatically target and deploy the ABMs; and a retrofitted detection device (code name: SKYEYE) built on proven, patented radar technology which your company owns. All of these devices: the ABMs, the AMCC and SKYEYE will be completely housed in the MHU, which is planned to be an enhanced18-wheel tractor-trailer. A self-contained power source (for the ABMs) and solar charged batteries for the AMCC and SKYEYE make the entire AMDS portable and completely automatic (no personnel are required to operate any of the systems). However, military personnel on a regular basis will perform routine system monitoring and maintenance, preferably from a remote site. On-site maintenance should only be needed on rare occasions expected to arise from unforeseen events such as earthquake, tornados, ice storms, etc. Should it become necessary, military personnel will move the AMDS to a location known only to them. While it was not included in the design accepted by the DoD, your company would like to be able to provide additional capability with the system: they would like the AMDS to be able to operate while it is being moved.

You are the project manager and oversee the efforts of over a dozen nuclear scientists, engineers, and technology professionals. Many of them are acquainted with the rudiments of project management, but very few know much about project risk management. You'll need to do some education along with managing schedule, budget and scope.

Details: Create a Risk Template by listing those risks that you think are appropriate for Project X. The template should include:

* Description of the risk
* External risks
* Internal risks
* Budget risks
* Schedule risks
* Resource risks
* Quality risks

Categorize them according to your knowledge of risks and risk templates. If you have made assumptions about the project, include them at the top or bottom of the template.

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