Reference no: EM133100974

Question 1 - You would like to have $75,000 in 15 years. To accumulate this? amount, you plan to deposit an equal sum in the bank each year that will earn 8 percent interest compounded annually. Your first payment will be made at the end of the year.

a. How much must you deposit annually to accumulate this? amount?

b. If you decide to make a large? lump-sum deposit today instead of the annual? deposits, how large should the? lump-sum deposit? be? ? (Assume you can earn 8 percent on this? deposit.)

c. At the end of year? 5, you will receive $20,000 and deposit it in the bank in an effort to reach your goal of $75,000 at the end of year 15. In addition to the? lump-sum deposit, how much must you invest in 15 equal annual deposits to reach your? goal? ? (Again, assume you can earn 8 percent on this? deposit.)

Question 2 - Future value of an? annuity - Find the future value at the end of year 10 of an annuity that pays ?$1,000 per year for 10 years compounded annually at 10 percent. What would be the future value of this annuity if it were compounded annually at 15 percent?

Question 3 - Net present value? calculation - Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $5,000,000 and would generate annual net cash inflows of $1,000,000 per year for 8 years. Calculate the?project's NPV using a discount rate of 9 percent.

Question 4 - Project H requires an initial investment of $100,000 and the produces annual cash flows of $45,000 per year for each of the next 3 years. Project T also requires an initial investment of $100,000 and produces cash flows of $30,000 in year 1, $40,000 in year 2, and $70,000 in year 3. If the discount rate is 10% and the projects are mutually exclusive

1. H and T are equally attractive

2. Both Projects should be chosen

3. Project t should be chosen

4. Project H should be chosen

Question 5 - Calculating EAC - Barry Boswell is a financial analyst for Dossman Metal? Works, Inc. and he is analyzing two alternative configurations for the? firm's new plasma cutter shop. The two? alternatives, denoted A and B? below, will perform the same? task, but alternative A will cost $80,000 to? purchase, while alternative B will cost only $55,000. Moreover, the two alternatives will have very different cash flows and useful lives. The? after-tax costs for the two projects are as? follows:

a. Calculate each? project's EAC, given a discount rate of 10 percent.

b. Which of the alternatives do you think Barry should? select? Why?