As the owner of a small startup, you are faced with a few major financial decisions concerning the expansion or potential sale of your business. Based on the following details, you must calculate the Present Value, Future Value, Loan Amortization and NPV/Firm Value. Present Value: You are required to have $250,000 seven years from now for new manufacturing equipment. Not sure how much you will need to save as a lump-sum today, you calculate the present value (for the beginning of the period) with the following additional details. Interest Rate of 6% with no future deposits. Future Value: To take advantage of the rising interest rate environment through the actions of the Federal Reserve, you decide to invest in U.S. Treasury Bills maturing in one year. Curious to know what your investment will be worth one year from today, you calculate the future value (for the end of the period) based on the following details. Number of period is one, interest rate is 5.25% (compounded monthly), no future deposits, initial investment of $50,000. Loan Amortization: As an entrepreneur, you know the importance of managing debt effectively, you are curious on how your loan amortization schedule looks like for your 10-year fixed rate mortgage on your new building, based upon the following details: Original Loan Balance: $125,000 Loan Term: 10 years Interest Rate: 4.5% Number of payments per year: 12 What is the total amount in interest you would have paid back after completing your loan amortization table? NPV/Firm Valuation: A few perspective buyers are interested in potentially purchasing your firm, based on the following cash inflows and initial investment. You prepare an NPV/Firm Valuation calculation. Initial Investment: $75,000 Annual Cash Flows for 12 years: $10,000 Discount Rate: 6% Calculate the rate of return on the NPV calculation and determine if the NPV proves to be a sound investment decision.
As the owner of a small startup, you are faced with a few
major financial decisions concerning the expansion or
potential sale of your business. Based on the following
details, you must calculate the
Loan Amortization and
Present Value:
You are required to have $250,000 seven years from now
for new manufacturing equipment. Not sure how much you
will need to save as a lump-sum today, you calculate the
present value (for the beginning of the period) with the
following additional details. Interest Rate of 6% with no
future deposits.
Future Value:
To take advantage of the rising interest rate environment
through the actions of the Federal Reserve, you decide to
invest in U.S. Treasury Bills maturing in one year. Curious to
know what your investment will be worth one year from
today, you calculate the future value (for the end of the
period) based on the following details. Number of period is
one, interest rate is 5.25% (compounded monthly), no future
deposits, initial investment of $50,000.
Loan Amortization:
As an entrepreneur, you know the importance of managing
debt effectively, you are curious on how your loan
amortization schedule looks like for your 10-year fixed rate
mortgage on your new building, based upon the following
details:
Original Loan Balance: $125,000
Loan Term: 10 years
Interest Rate: 4.5%
Number of payments per year: 12
What is the total amount in interest you would have paid
back after completing your loan amortization table?
NPV/Firm Valuation:
A few perspective buyers are interested in potentially
purchasing your firm, based on the following cash inflows
and initial investment. You prepare an NPV/Firm Valuation
calculation.
Initial Investment: $75,000
Annual Cash Flows for 12 years: $10,000
Discount Rate: 6%
Calculate the
determine if the NPV proves to be a sound investment
decision.
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