Consider these two alternatives.Alternative 2$6,400$2,000$520$1,3008 years12 yearsa. Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initialdecision based on these data would be reversed? The annual MARR is 18% per year.b. Determine the life of Alternative 1 for which the AWs are equal.Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year.More InfoN12345a. The capital investment of Alternative 2 would have to be $ or less for the initial decision to be reversed. (Round to the nearest dollar.)6789101112131415TactorTo Find FGiven PFIP1.18001.39241.64301.93882.28782.69963.18553.75894.43555.23386.17597.28768.599410.147211.9737Vorurt actorTo Find PGiven FPIF0.84750.71820.60860.51580.43710.37040.31390.26600.22550.19110.16190.13720.1163Capital investmentAnnual revenuesAnnual expensesEstimated market valueUseful life0.09850.0835TacioTTo Find FGiven AFIA1.00002.18003.57245.21547.15429.442012.141515.327019.085923.521328.755134.931142.218750.818060.9653WORLIFT actorTo Find PGiven APIA0.84751.56562.17432.69013.1272Alternative 1$4.300$1,550$400$6503.49763.81154.07764.30304.49414.65604.79324.90955.00815.0916CTactorTo Find AGiven FAIF1.00000.45870.27990.19170.13980.10590.08240.06520.05240.04250.03480.02860.02370.01970.0164TactorTo Find AGiven PAIP1.18000.63870.4599Q0.37170.31980.28590.26240.24520.23240.22250.21480.20860.20370.19970.1964

Equivalent annual worth:Equivalent Annual Worth (EAW) is a financial metric that is used to…

Alternative 2 $6,400 $2,000 $520 $1,300 8 years 12 years Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial ecision based on these data would be reversed? The annual MARR is 18% per year. . Determine the life of Alternative 1 for which the AWs are equal. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year. Capital investment Annual revenues Annual expenses Estimated market value Useful life Alternative 1 $4,300 $1,550 $400 $650

Alternative 2 $6,400 $2,000 $520 $1,300 8 years 12 years Suppose that the capital investment of Alternative 1 is known with certainty. By how much would the estimate of capital investment for Alternative 2 have to vary so that the initial ecision based on these data would be reversed? The annual MARR is 18% per year. . Determine the life of Alternative 1 for which the AWs are equal. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year. Capital investment Annual revenues Annual expenses Estimated market value Useful life Alternative 1 $4,300 $1,550 $400 $650

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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Question 2 You are considering investing in two different investment options. The first option offers no return for the first three years, but afterward it offers to pay you $20,000 per year for four years. The second option offers to pay you $20,000 per year for three years and $30,000 in the fourth year. All payments are made at year-end. If a discount rate of 8% per annum is assumed, determine by using the present value the option that offers you a higher return.
Man.3
Term Rate (EAR %) 1 year 1.97 2 years 2.46 3 years 2.61 5 years 3.35 7 years 3.74 10 years 4.15 20 years 5.02 a. Calculate the present value of an investment that pays $1,000 in two years and $4,000 in five years for certain. b. Calculate the present value of receiving $200 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average rate in year 3 and year 5.) c. Calculate the present value of receiving $1,900 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.) a. Calculate the present value of an investment that pays $1,000 in two years and $4,000 in five years for certain. The present value of the investment is $ (Round to the nearest cent.)
QUESTION 109 If $200 is invested at the end of each year for 8 years at a rate of 12% what will the ending value of the investment be? TRUE OR FALSE
Chapter 10 Discussion Q2 A perpetuity will pay $900 per year, starting five years after the perpetuity is purchased. What is the present value (PV) at time 0, given that the interest rate is 11%? Show your steps. A) $2695 B) $4312 C) $5390 D) $3234
Incorrect Question 13 Suppose you invest $2,500 in a fund earning 15% simple interest. Further suppose that you have the option at any time of closing this account and opening an account earning compound interest at an annual effective interest rate of 9%. At what instant should you do so in order to maximize your accumulation at the end of five years? (Round your answer to two decimal places.) 4.53 years How about if you wish to maximize the accumulation at the end of ten years? (Round your answer to two decimal places.) 4.53 years
esc 1 i Sophie has already saved $14,150 in her RRSP today and she plans to continue to add on equal deposits at the end of every year for the next 7 years. What annual payment is required to accumulate $70,000 in total at the end of the 7 years if the nominal rate of return on the investment is 6.33% compounded semi-annually? Enter the future value as a positive value in the FV box below. Enter PV and PMT as positive or negative values based on FV being positive. Report PMT accurate to the nearest cent. P/Y = C/Y= N= I/Y= PV = $ PMT = $ FV = $ The size of each annual payment required is (enter a positive value) $ Submit Question ! 1 Q A 6² F1 @ 2 20 F2 W # 3 E 80 F3 $ 4 a F4 R % 5 e F5 T A 6 si Y & 1 7 8: F7 U * 00 8 DI FE
QUESTION 42 Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30 years @ 6% annual interest rate: Following are appropriate factors from tables: Table % / n Present Value of annuity due $1 Present Value of ordinary annuity of $1 Present value of $1 Future Value of ordinary annuity of $1 6%/30 12.15812 13.76483 .17411 79.05819 $????????? invested annually at the end of the year. Required Computations: $12,648.91 $72,648.92 $33,3333.33 $11,927.43
question 15
QUESTION 41 Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30 years @ 6% annual interest rate: Following are appropriate factors from tables: Table % / n Present Value of annuity due $1 Present Value of ordinary annuity of $1 Present value of $1 Future Value of ordinary annuity of $1 6%/30 12.15812 13.76483 .17411 79.05819 One single deposit of $???????? for 30 years. Required Computations: $166,666.66 $174,110 $175,933.83 $126,489
Question 33 Growing Annuity Problem: Set Calculator to BEGIN for this problem.i.e., we are assuming Payments are at beginning of year (Annuity Due). Assume you save $7500 at the beginning of each year AND you increase this amount by 3.5% each year. How much will you have in 40 years if your expected return = 8% per year. [NOTE: I have %3D rounded the answer to whole dollars.) O $3.245,998 $3,197,747 $2,503,625 $1,228,358 O $802,622 Question 34 Growing Annuity Problem: Set Calculator to BEGIN for this problem.ie, we are assuming Payments are at beginning of year (Annuity Due). Assume you have just retired and you currently have $2,500,000 in ch vear for
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