What is the rate of return required to accumulate

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Reference no: EM132283690

Calculations

If you want to accumulate $500,000 in 20 years, how much do you need to deposit today that pays an interest rate of 15%?

PV=fv(1+r)n

FV= 500,000

R= 15%

N= 20

PV= 500,000/1+0.15)20

500,000/16/37= 30,543.68

Deposit Amount: $30,543.68

What is the future value if you plan to invest $200,000 for 5 years and the interest rate is 5%?

200,000 * [1(0.05x 5)] = 200,000[1(0.25)] = 250, 000

Future value: $250,000

What is the interest rate for an initial investment of $100,000 to grow to $300,000 in 10 years?

R= (future value/present value) 1/t- 1

R= (300,000/100,000)(1/10) - 1= 0.1161

Initial interest rate: 11. 61%

If your company purchases an annuity that will pay $50,000/year for 10 years at a 11% discount rate, what is the value of the annuity on the purchase date if the first annuity payment is made on the date of purchase?

Value of annuity= 50,000*6.5370476= $326,852.38

Value of annuity: $326, 852.38

What is the rate of return required to accumulate $400,000 if you invest $10,000 per year for 20 years. Assume all payments are made at the end of the period.

400,000=10,000[(1+i)n - 1)/ i]

Rate of return required: 6.77%

Calculate the project cash flow generated for Project A and Project B using the NPV method. Based on the excel calculations: the following questions were able to be answered.

Attachment:- Using the Pay back Method IRR and NPV.rar

Reference no: EM132283690

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