Calculating rate of sales increase, annual payment, PV...
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1. A corporation's 1995 sales were $ 10,794,625. Sales were $5 million 10 years earlier. To the nearest percentage point, at what rate have sales been growing?
2. If you buy a factory for $100,000 and the terms are 10% down, the balance of $90,000 to be paid off over 8 years at a 8% rate of interest on the unpaid balance, what are the 8 equal annual payments?
3. As a winner of a lottery you are going to receive $10,000 every year forever, starting one year from today. If the appropriate discount rate is 8%, what is the present value of the award cash flows?
4. You deposit $100 in a savings account that pays 10% interest compounded annually. How much would you have in your account at the end of 7 years?
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This solution is comprised of detailed calculations of the following:
1. A corporation's 1995 sales were $ 10,794,625. Sales were $5 million 10 years earlier. To the nearest percentage point, at what rate have sales been growing?
2. If you buy a factory for $100,000 and the terms are 10% down, the balance of $90,000 to be paid off over 8 years at a 8% rate of interest on the unpaid balance, what are the 8 equal annual payments?
3. As a winner of a lottery you are going to receive $10,000 every year forever, starting one year from today. If the appropriate discount rate is 8%, what is the present value of the award cash flows?
4. You deposit $100 in a savings account that pays 10% interest compounded annually. How much would you have in your account at the end of 7 years?
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1. A corporation's 1995 sales were $ 10,794,625. Sales were $5 million 10 years earlier. To the nearest percentage point, at what rate have sales been growing?
Using compound annual growth rate:
$5,000,000 (1 + g)10 = $10,794,625
$10,794,625 / $5,000,000 = 2.1589
(2.1589)1/10 = 1.080
1.080 - 1 = 0.08 ...
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