(Inspired by CT1 exam April '09) A company has agreed to rent a warehousefor 30 years. The rent will be paid quarterly in advance and will increase everythree years at the rate of 3% per annum compound. The initial rent is set at£1,200,000 p.a. with the first payment due immediately. Calculate the NPV ofthe contract at a rate of interest of 5% p.a.

To calculate the NPV of a 30-year warehouse rental contract with quarterly rent payments increasing…

Answered: (Inspired by CT1 exam April '09) A…

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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A university offers its students three financing options for a degree course that lasts exactly three years.Option AFees are paid during the term of the course monthly in advance. The fees are £10,000 per annum in the first year and rise by 5% on the first and second anniversaries of the start of the course.Option BThe university makes a loan to the students which is repaid in instalments after the end of the course. The instalments are determined as follows:−No payments are made until three years after the end of the course.−Over the following 15 years, students pay the university £1,300 per year, quarterly in advance.−After 15 years of payments, the quarterly instalments are increased to £1,500 per year, quarterly in advance.−After a further 15 years of payments, the quarterly instalments are increased to £1,800 per year, quarterly in advance, for a further 15-year period after which there are no more payments.Option C−Students pay to the university 3% of all their future earnings…
Your company must make a $500,000 balloon payment on a lease 2 years and 9 months from today. You have been directed to deposit an amount of money quarterly, beginning today, to provide for the $500,000 payment. The account pays 4% per year, compounded quarterly. What is the required quarterly deposit? Note: Lease payments are due at the beginning of the quarter.
A retail park's current yearly rent is set at £271 thousand, which is due four months in advance. According to the terms of the lease, rent will rise on a regular basis every four years. The first increase, at a compound annual growth rate of 3.8%, is due in exactly four years. Additionally, after 20 years, the retail park reverts to the original owner at no additional cost.Based on an effective annual interest rate of 5.3%, determine the present value in thousands, to five decimal places, of the rental income that this investment will produce in the future. (solution in numbers)
A leasing contract calls for an immediate payment of $101,000 and nine subsequent $101,000 semiannual payments at six-month intervals. What is the PV of these payments if the annual discount rate is 9%? (Hint: First find the semiannual rate that is equivalent to the annual rate.)
An instalment contract for the purchase of a car requires payments of $280.49 at the end of each month for 3.75 years. Interest is 10% per annum compounded monthly. 1. The amount financed is: 2. The interest is:
York Construction agreed to lease payments of $762.79 on construction equipment to be made at the end of each month for six years. Financing is at 15% p.a. compounded monthly. a. If the lease were paid off after ten months, what would the total interest be? b. How much of the total interest would be due to deferring the first nine payments?
You enter into a five-to-eight-month forward rate agreement with a firm. You agree to lend the firm a 3-month loan of $5 million starting 5 months from now, with a quarterly compounded forward interest rate of 2.5% per annum. Currently, the continuously compounded 5-month and 8-month interest rates are 3% per annum and 3.5% per annum, respectively. 1) What is the implied forward rate for the 3-month period starting 5 months from now? 2) What is the present value of this forward rate agreement to you now?
A contract calls for payments of $2800 at the end of every 6-month period for 8 years and additional payments of $6000 at the end of 5 years and $7500 at the end of 8 years. What is the present worth of the contract at 7.5% p.a. compounded continuously?
You are offered a $3,000,000 contract to be paid to you over 6 years at $500,000 per year. The first payment will be made at the end of the year. If the current market interest rate is 3.5%, what is the contract really worth to you? $2,500,000.00 $3,275,076.09 $2,664,276.51 $3,000,000.00
A property development agreement valued at $47,000 requires annual lease payments of $7,500. The first payment is due three years after the date of the agreement and interest is 9% compounded monthly. For how long will payments be made? The payments will be made forO vear(s) and O month(s). (Type whole numbers.)
An installment contract for the purchase of a car requires payments of $346.34 at the end of each month for 2 years. Interest is 5% per annum compounded monthly. (a) What is the amount financed? (b) How much is the interest cost? (a) The amount financed is $ (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.) (b) The interest is $. (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
A contract requires lease payments of $700 at the beginning of every month for 4 years. a. What is the present value of the contract if the lease rate is 4.75% compounded annually? Round to the nearest cent b. What is the present value of the contract if the lease rate is 4.75% compounded monthly? Round to the nearest cent

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