Week2 - Dharmin Shah - Section 70

Solve using Rate of Return Method

Present Value of an Annuity of $1 Discount Rate Present Value of $1 Discount Rate Periods 8% 10% 8% 10% 0.6806 0.6209 3.9927 3.7908 0.5835 0.5132 5.2064 4.8684 0.5002 0.4241 6.2469 5.7590 Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $140,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyche's purchase of Trim?

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Present Value $ 400 2,091 33,105 32,800 Years Interest Rate 12 % 10 % 15% 22 % Future Value $ 1,255 3,850 388,620 202,748

Assume that the base year is 2015. Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity $2 250 $3 200 $3 300 $2 400 $4 400 $5 500 A B C 9. What was the inflation rate between the two years? O A) 1 percent O B) 2 percent O C) 3 percent O D) 4 percent O E) 8 percent 27

E3

Ee 140.

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Calculate the present value assuming an annual discount rate of 12.00%? Years: CFs: O $436.99 O $541.87 O $450.10 O $371.44 $493.80 0 1 2 3 $0 $75 $225 $0 $300

What is the period in years?

LG 6 P5-60 Number of years to provide a given return In each of the following cases, determine the number of years that the given annual end-of-year cash flow must continue to provide the given rate of return on the given initial amount. TTT Case Initial amount Annual cash flow Rate of return A $1,000 $ 250 11% 150,000 30,000 15 80,000 10,000 10 600 275 E 17,000 3,500

What is the PV?

Question Content Area What is the present value of $8,000 to be received at the end of 6 years if the required rate of return is 15%? Following is a table for the present value of $1 at compound interest: Year 15% 1 0.870 2 0.756 3 0.658 4 0.572 5 0.497 6 0.432 7 0.376 8 0.327 9 0.284 10  0.247 Following is a table for the present value of an annuity of $1 at compound interest: Year 15% 1 0.870 2 1.626 3 2.283 4 2.855 5 3.353 6 3.785 7 4.160 8 4.487 9 4.772 10  5.019

x1%=25% x2=100$

Q8 What annual rate of return is earned on a $4,000 investment made in year 2 when it grows to $7,600 by the end of year 8? (Do not round intermediate calculations. Round your answer to 2 decimal places.) ANNUL RATE OF RETURN?

Future value interest factor of $1 per period at i% for n periods, FVIF(in). Period 0.5% 10% 15% 20% 3.0% 1 6 8.0% 1.0800 1.1664 1.2597 1.3605 1.4693 1.5859 1.7138 1.8509 1.9990 2.1589 23316 25182 2.7196 9.0% 1.0900 1.1881 1.2950 1.4116 1.5386 1.6771 1.8280 1.9926 2.1719 2.3674 2.5804 28127 3.0658 1.0050 10100 10150 1.0200 2 1.0100 1.0201 1.0302 10404 3 1.0151 1.0303 1.0457 1.0612 4 1.0202 1.0406 1.0614 1.0824 1.0253 1.0510 1.0773 1.1041 5 1.0304 1.0615 10934 1.1252 1.0355 1.0721 1.1098 1.1487 1.0407 1.0829 1.1265 1.1717 1.0459 1.0937 1.1434 1.1951 1.0511 1.1046 1.1605 12190 1.0564 1.1157 1.1779 12434 12 1.0617 1.1258 1.1956 12682 13 1.0570 1.1381 12136 12936 14 1.0723 1.1495 1.2318 13195 15 1.0777 1.1610 12502 13459 16 1.0831 1.1726 1.2690 1.3728 17 10885 1.1843 12880 1.4002 18 1.0939 1.1961 1.3073 1.4282 19 1.0994 12081 1.3270 1.4568 20 1.1049 1.2202 1.3469 1.4859 21 1.1104 1.2324 13671 15157 22 7 8 9 10 11 1.4106 1.3439 2.9372 3.1722 3.4259 3.7000 3.3417 3.6425 3.9703 4.3276 4.7171…

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7.5 q5  A 6-year project will incur $7000 in shutdown costs (in nominal terms) after the end of the project (in Year 7).  If the expected inflation rate is 2.7% p.a., what is the real value of the project's shutdown costs? a. $6127 b. $5656 c. $5809 d. $5966

Q1 Compare present value analysis, (minimum attractive rate of return is %8 annualy.) Alternative F Alternative Z First cost, TL Annual earning, TL Maintance cost every 5 year, 400.000 650.000 -same amount- wwww w 90.000 115.000 www m 25.000 30.000 TL Scrap value, TL lifetime, (years) 100.000 1.200.000 50 infinite