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Acme plans to construct a new manufacturing facility in 14 years. It is estimated that the cost in 14 years will be SUN (use all 9 digits). If Acme sets aside the money today in an account earning A% (A = the first digit of SUN), how big should this lump sum deposit be? Here is a HINT for solving this (and subsequent problems): Begin by using a value that can be found in the tables (e.g., n = 5 years) to solve this problem. Next, use an Excel TVM function to again solve the same problem. (The Help function within Excel will provide you with the necessary formula and format.) If you get matching results, you probably utilized the Excel function correctly. Finally, remember to replace your "test" value with the correct number to obtain your final result.
Acme has decided to establish a sinking fund for its outstanding preferred stock issue. SUN (use all 9 digits) represents the amount of the issue that will be retired in 26 years. At the end of each of the next 26 years, Acme will deposit an equal amount into an account that earns B% (B = the second digit of SUN). What is the value of this periodic deposit?
One of Acme's new projects will generate the following cash flows at the end of each of the next three years: year 1 = SUN digits 1-3; year 2 = SUN digits 4-6; year 3 = SUN digits 7-9. If these cash flows are discounted at 13%, what is the sum of their present values?
Acme is assessing its employee pension fund. At the end of each of the next 29 years Acme will have to pay its retirees (use the first 4 digits of your SUN). If the fund is estimated to earn D% (D = the fourth digit of SUN), how much does Acme need to have set aside today to ensure that it can meet its future obligations? (At the end of the 29th year, the balance should be drawn to zero.)
As part of a new labor contract, Acme has agreed to make a one-time contribution of $1,000,000 to the construction of a new physical fitness facility for its employees. This amount will be placed in an account earning E% (E = the fifth digit of SUN). When the account grows to $1,250,000, construction will commence. How long must employees wait until construction of their new gym begins? (Your answer should be accurate to two decimal places, e.g., 1.57 years).
Prepare for Acme's CFO an analysis that contains solutions for all five problems. Provide a brief explanation of both the problem and the solution. Be sure to clearly present and label all values and variables, provide Excel TVM formulas, and conclude each question with a brief interpretation of your results. Your entire submission may be contained within an Excel document. (Note: You must use Excel TVM functions to complete this assignment; using a hand calculator or website and plugging values into a template is not acceptable.)
This website provides a number of resources on calculating the TVM. Click the link for "Time Value on Excel" to download a workbook with sample calculations. (also attached) HYPERLINK "http://www.studyfinance.com/lessons/timevalue/lesson19.mv" \t "_blank" http://www.studyfinance.com/lessons/timevalue/lesson19.mv. Also, an Excel guide is available in the Labs area of the Virtual Campus. Click "Labs," then "Student Success Learning Lab." Click "Presentation Material" in the left navigation bar. Choose the "Excel Guide." You may also download the "Financial Functions" file for additional assistance (be sure to choose "Save," not "Open" when downloading the file).
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