2. The Electric Company is considering the purchase of a hillside ranch for possible use as a windmill farm sometime in the future. The owner of the 800-acre ranch will sell $4000 per acre if the company will pay her in two payments - one payment now and another that is twice as large 4 years from now. If the transaction interest is 12% per year, what is the amount of the first payment?

2. The Electric Company is considering the purchase of a hillside ranch for possible use as a windmill farm sometime in the future. The owner of the 800-acre ranch will sell $4000 per acre if the company will pay her in two payments - one payment now and another that is twice as large 4 years from now. If the transaction interest is 12% per year, what is the amount of the first payment?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Tanya is considering an investment that will require an initial payment of 400,000 and additional payments of 100,000 and 50,000 at the end of years one and two, respectively. It is expected that revenue from this investment will be 150,000 per year for five years, beginning one year from the initial investment.Assuming an annual effective rate of 10%, calculate the net present value of this investment.
Alice is considering an investment. If she undertakes the investment, she will receive $5000 at the end of each of the next four years. The opportunity requires an initial investment of $2000 plus an additional investment at the end of the third year of $6000. What is the NPV of this opportunity if the interest rate is 5% per year? Should Alice take it? Maximum size for new files: 100MB
Emerson developed a new style of camping trailer. He is considering a licensing agreement with Easy-Tow, who will manufacture the new trailer. They are proposing to pay him $36,000 now, and $18,000 at the beginning of each of the eleven years of the licensing agreement, starting in two years. If interest is 5.35% compounded semi-annually, what is the agreement worth today? The agreement is worth $ today. (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
Earl Miller, owner of a Papa Gino’s franchise, wants to buy a new delivery truck in 6 years. He estimates the truck will cost $30,000. If Earl invests $20,000 now at 5% interest compounded semiannually. How much more or less will Earl have for the truck at the end of 6 years? (Round your answers to the nearest cent.)
Yang is considering buying an asset that, starting 5 years from now, will pay $10,000 per year forever. Assume that the required return is 7.25%. What is the most Yang should pay for this asset?
AI Derover wants to buy a used jeep in five years. He estimates the cost will be $13,000 If he invests $8,500 now at a rate of 10% compounded semiannually, will he have enough money to buy the jeep at the end of five years? Show your work (Round your answer to the nearest cent.) Yes he will have 13,845 60
Michael Security has learned that a rival has offered to supply a parking garage with security for ten years for $45,000 up front and a further $15,000 per year. Michael Security offers to provide security for eight years for an upfront cost of $60,000 and a separate yearly payment. What should the yearly payment be so that Michael's offer matches the equivalent annual annuity of their rival's offer? (Assume a cost of capital of 5%.)

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