One investment plan that you can buy on 1st December 2020 promises to give you certain payment of Rs.5000 on 1st December 2022. Then the payment will grow at 10% per annum. Six such payments will be made, and the last payment will be made on 1st December 2027. a)Draw the cash flow diagram. b)What is the price you would pay to buy such a product if your required rate of return is 10% per annum? c)What is the equivalent equal annual cash flow amount if the amount is paid for 7 years (1st December 2021 to 1st December 2027) in seven equal installments instead of six growing installments?

Q: A security that costs $89.90 will provide a return of 6.5 percent per year. If you want to keep the…

A: PV=today cost=$89.90FV=Future value=$143.80Interest rate=r=6.5%Required to find out the period…

Q: Use the savings plan formula to answer the following question. You put $400 per month in an…

A: The time value of money is a financial concept that refers to the idea that money today is worth…

Q: Consider an investment which pays $2,000 at the end of year 1, year 2, and year 3. In year 4, the…

A: Terminal value at end of year 3 = Cash flow in year 4  / (Interest rate - growth rate) = $5000 / (7%…

Q: You plan to use the 150,000 TL fund, which was idle for a year, in a time deposit account. The…

A: The future value is the future worth of the mount that will be paid or received at the end of the…

Q: You are considering the purchase of real estate that will provide perpetual income that should…

A: T-bill rate is like Risk free Rate = 6%  Expected Market Return = 12%

Q: You can expect annual benefit of $15,800 if you deposit $142,200 in a bank account right now. The…

A: Pay back period is the period required to recover the initial cost of the project.

Q: What is the most you would be willing to pay for an investment that will pay you $537 in one year,…

A:

Q: Suppose you invest $3,000 today and receive $10,000 in 25 years. a. What is the internal rate of…

A: IRRIt is a capital budgeting technique of a discounted cash flow that gives a rate of return is that…

Q: An investment offers to pay you $8,000 a year for five years. If it costs $28,840, what will be your…

A: YEARS 5 PMT (MONTHLY DEPOSIT) 8000 PRESENT VALUE $28,840 FUTURE VALUE $0

Q: You currently have $8,700 to invest. You can invest the full amount now for a period of 9 years at…

A: Final Value after 9 years = $15,000Initial Value = $8,700Number of years (n) = 9

Q: An investor has to decide how much he will be willing to pay for an investment that generates the…

A: The present value of future cash flows will be helpful in finding out the total investment which is…

Q: An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you…

A: Here,

Q: You have an investment opportunity that promises to pay you $18, 499 in four years. Suppose the…

A: Investment is the key allotment of monetary assets with the purpose of creating wages or…

Q: You plan to make a series of deposits in an interest-bearing account. You will deposit $1,000 today,…

A: The future value of all the cash flows can be obtained by doing the sum of individual future value…

Q: You wish to have an investment that will bring about $50 000 in ten years, and the rate of return is…

A: Value of investments after 10 years=$50,000Rate of return(r)=8%Time(n)=10 years

Q: Suppose that you have $16,000 to invest and you are trying to decide between investing in project A…

A: The present value refers to the current worth of future cash flow. Present value can be determined…

Q: You have a chance to buy an annuity that pays $50,000 at the beginning of each year for 15 years.…

A: Present value means today’s value of money you expect to receive or pay in future.   PV = PMT…

Q: Assume that today is the end of 2022 and you have decided to start an investment plan at the end of…

A: Present value is the estimation of the current value of future cash value which is likely to be…

Q: You have been offered a unique investment opportunity. If you invest $8,800 today, you will receive…

A: Net Present Value is the present value of cash inflows less the initial investment. If NPV is…

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A: given present value    = 27980 future value a year…

Q: You have an opportunity to make an investment that will pay ​$200 at the end of the first​ year,…

A: Present value of stream of cash flows can be calculated by discounting each cash flow to the…

Q: rst year and con CO rer, increasing in Inflation is fored ind d your discount Scoui

A: The NPV using real cash flows can be calculated as follows : Calculations for above :

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A: Given: Initial investment = $9,500 Cash in flow in year 1 = $475 Cash in flow in year 2 = $1,425…

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A: Present value of perpetual cash flows is calculated as follows:-Present value of perpetual cash…

Q: You will receive $5,000 one year from now, 6000 three years from now, and 7000 five years from now…

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Q: On January 1, 2021, you are considering making an investment that will pay 3 annual payments of…

A: Present value is a current value of future sum of money of cash flows, given at specified rate of…

Q: Your organization has been asked to invest in a continuing care retirement center. Your investment…

A: Profitability index = Present value of cash flow / present value of investment

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A: Price we should pay is present value of cash flows

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A: Answer a) Project A Given: Cash flow Today = -$10Cash flow in one year =$20Risk free interest rate…

Q: You plan to buy a financial product today. You expect product will give you $100 at the end of first…

A: IRR is the internal rate of return at which the present value of cash flow is equal to the initial…

Q: You are evaluating a growing perpetuity product from a large financial services firm. The product…

A: here is the formula for calculating the present value of growing perpetuity PV = A/(r-g) where…

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A: Step 1 An annuity is a contract that you have with an insurance provider that calls for periodic…

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A: If Present value of Cash inflows is more than present value of cash outflows net present value is…

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Q: Suppose that you are planning to buy a boat in in 28 years [cell B3] for $100,000 [cell B2], and you…

A: Period = 28 yearsBuying cost = $100,000Amount deposited = $26,000

Q: Investment X offers to pay you $5,300 per year for eight years, whereas Investment Y offers to pay…

A: Solution for Present Value (PV) of Investments X and YWe will solve this using both Excel formulas…

Q: value

A: Introduction: The payments that are made indefinitely or forever is referred to as perpetuity. In…

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A: Calculate the rate of return on market portfolio as follows:Rate of return on market portfolio is…

Q: What would be the interest rate that would allow you to convert an investment from B/.5,000 to…

A: To calculate the interest rate that would allow an investment to grow from B/.5,000 to B/.20,227.79…

Q: You are thinking about investing in a project that will provide you a cash flow of $78922 in 3 years…

A: Net present value is the method of capital budgeting that is used to evaluate investment…

Q: Suppose that we make contributions to a fund of $125 today and $750 in two years for a return of…

A: We have to write the NPV as function of the discount factor ν and then proceed to calculate the…

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A: We can determine the PV of the cash flow using the formula below:r = discount rate = 3.80% = 0.038

Q: You are considering a risk-free investment that costs $4000 and pays $5000 in one year. You can…

A: The difference between the current value of cash inflows and outflow of cash over a period of time…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.