6.22 Computing annuity payment: Gary Whitmore is a high school sophomore. He currently has $7,500 in a savings account that pays 5.65 percent annually. Gary plans to use his current savings plus what he can save over the next four years to buy a car. He estimates that the car will cost $12,000 in four years. How much money should Gary save each year if he wants to buy the car? 6.23 Growing annuity: Modern Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility that managers a the company are evaluating is to take over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash flow of $92,500 last year, and the current owners expect an annual growth rate of 6.3 percent. If Modern Energy uses a discount rate of 14.5 percent to evaluate such businesses, what is the present value of this growing annuity? 6.24 Future value of annuity due: Jeremy Denham plans to save $5,000 every year for the next eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans to use his savings toward the down payment on a house. If his investment in a mutual fund will earn him 10.3 percent annually, how much will he have saved in eight years when he buys his house? 6.25 Present value of an annuity due: Grant Productions borrowed some money from the California Finance Company at a rate of 17.5 percent for a seven-year period. The loan calls for a payment of $1,540,862.19 each year beginning today. How much did Grant borrow? 6.26 Present value of an annuity due: Sharon Kabana has won a state lottery and will receive a payment of $89,729.45 every year, starting today, for the next 20 years. If she invests the proceed at a rate of 7.25 percent, what is the present value of the cash flows that she will receive? Round to the nearest dollar.
6.22 Computing annuity payment: Gary Whitmore is a high school sophomore. He currently has $7,500 in a savings account that pays 5.65 percent annually. Gary plans to use his current savings plus what he can save over the next four years to buy a car. He estimates that the car will cost $12,000 in four years. How much money should Gary save each year if he wants to buy the car? 6.23 Growing annuity: Modern Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility that managers a the company are evaluating is to take over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash flow of $92,500 last year, and the current owners expect an annual growth rate of 6.3 percent. If Modern Energy uses a discount rate of 14.5 percent to evaluate such businesses, what is the present value of this growing annuity? 6.24 Future value of annuity due: Jeremy Denham plans to save $5,000 every year for the next eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans to use his savings toward the down payment on a house. If his investment in a mutual fund will earn him 10.3 percent annually, how much will he have saved in eight years when he buys his house? 6.25 Present value of an annuity due: Grant Productions borrowed some money from the California Finance Company at a rate of 17.5 percent for a seven-year period. The loan calls for a payment of $1,540,862.19 each year beginning today. How much did Grant borrow? 6.26 Present value of an annuity due: Sharon Kabana has won a state lottery and will receive a payment of $89,729.45 every year, starting today, for the next 20 years. If she invests the proceed at a rate of 7.25 percent, what is the present value of the cash flows that she will receive? Round to the nearest dollar.
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
Related questions
Question
I need the answer to 6.22 and 6.26.
Transcribed Image Text:6.22 Computing annuity payment: Gary Whitmore is a high school sophomore. He currently has
$7,500 in a savings account that pays 5.65 percent annually. Gary plans to use his current savings
plus what he can save over the next four years to buy a car. He estimates that the car will cost
$12,000 in four years. How much money should Gary save each year if he wants to buy the car?
6.23 Growing annuity: Modern Energy Company owns several gas stations. Management is
looking to open a new station in the western suburbs of Baltimore. One possibility that managers at
the company are evaluating is to take over a station located at a site that has been leased from the
county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station
generated a net cash flow of $92,500 last year, and the current owners expect an annual growth
rate of 6.3 percent. If Modern Energy uses a discount rate of 14.5 percent to evaluate such
businesses, what is the present value of this growing annuity?
6.24 Future value of annuity due: Jeremy Denham plans to save $5,000 every year for the next
eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans to use
his savings toward the down payment on a house. If his investment in a mutual fund will earn him
10.3 percent annually, how much will he have saved in eight years when he buys his house?
6.25 Present value of an annuity due: Grant Productions borrowed some money from the
California Finance Company at a rate of 17.5 percent for a seven-year period. The loan calls for a
payment of $1,540,862.19 each year beginning today. How much did Grant borrow?
6.26 Present value of an annuity due: Sharon Kabana has won a state lottery and will receive a
payment of $89,729.45 every year, starting today, for the next 20 years. If she invests the proceeds
at a rate of 7.25 percent, what is the present value of the cash flows that she will receive? Round
to the nearest dollar.
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