Present Values with Multiple Cash Flows A first-round draft choice quarterback has been signed to a three-year, $10 million contract. The details provide for an immediate cash bonus of $1 million. The player is to receive $2 million in salary at 5.1 the end of the first year, $3 million the next, and $4 million at the end of the last year. Assuming a 10 percent discount rate, is this package worth $10 million? How much is it worth? (See Problem 1.) of denosits in an

Present Values with Multiple Cash Flows A first-round draft choice quarterback has been signed to a three-year, $10 million contract. The details provide for an immediate cash bonus of $1 million. The player is to receive $2 million in salary at 5.1 the end of the first year, $3 million the next, and $4 million at the end of the last year. Assuming a 10 percent discount rate, is this package worth $10 million? How much is it worth? (See Problem 1.) of denosits in an

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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Weat Subject: acounting
Emerald Enterprises is developing a new product at the cost of $ 50,000. The new product is expected to increase the cash flow for the next five years as follows: $ 10000, $ 15000, $ 15000, $ 20000 and $ 20000. If the discounting rate is 12%, what is the discounted payback period? (Note: Roundup the fractional values; that is if the payback period is 6.23 years, enter 7 years as payback period) 4 years 5 years 3 years 2 years
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You plan to deposit $100 at the end of every quarter (3 months) for 10 years starting at the end of month 1. Then after leaving the money in the account for several years, you plan to withdraw everything 20 years from today. How much is available to withdraw at the end of year 20 if the account pays a nominal annual rate of 6% compounded monthly? Question 4 Part A: Choose the correct Cash Flow Diagram for this scenario from the following choices. Option A Option B F=? F=? 120 1 120 240 240 i = 0.5% i= 6% A = 100 A = 100 Option C Option D F=? F=? 10 10 20 20 i= 0.5% i = 6% A = 100 A = 100 Question 4 Part B: Identify the correct Function Notation for this scenario. F = 100(P/A,0.5%,10)(P/F, 0.5%, 10) O F = 100(F/A,6%,120)(P/F, 6%, 120) O F = 100(F/A,0.5%,120)(F/P, 0.5%, 120) F = 100(F/A,6%,10)(F/P, 6%, 10) Question 4 Part C: Provide the final value for withdrawal at the end of year 20. Enter your answer in the form: 12345.67 Question 4 Part D: Choose the statement that is most correct…
A football is evaluating three contract options given to him. Each option offers a bonus and a series of payments over the life of the contract. The rate of return is 7.25% compounded anually to evaluate the options. Which contract should be chosen? Show your calculations. Year Cash flow Ever Football Club Heal Football Club Airy Football Club 0 bonus $3,500,000 $3,500,000 $3,500,000 1 Annual Salary $700,000 $850,000 $775,000 2 Annual Salary $750,000 $800,000 $775,000 3 Annual Salary $800,000 $750,000 $775,000 4 Annual Salary $850,000 $700,000 $775,000
Rafael corporation expects receive RM20,000 per year for 10 years and RM35, 000 per year for the next 10 years. What is the present value of this cash flow given 12% discount rate?
ATV commercial offers investors a perpetuity that will pay you $200 next year. The payment will then increase by 3.00% every year going forward. You would like a 7.00% on your investment. What is the value of this "offer" if the company can deliver what is promised? $206 $200 $5,000 $2,872
JS er st un gs Sunland, Inc. management is considering purchasing a new machine at a cost of $4,370,000. They expect this equipment to produce cash flows of $791,390, $796,950, $866,730, $1,116,300, $1,212,360, and $1,300,900 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.) The NPV is tA $
A borrower bought a house for $300,000; he can obtain an 80% loan with a 20-year fully amortizing, 7% interest rate and monthly payment. Alternatively, he could get a 30-year fully amortizing 90% loan at 9% What is the incremental cost of borrowing the additional fund?
engineering economics John bought a car worth $ 100,000 if paid in cash. If paid on installment basis, he will pay $ 20,000 downpayment, $ 30,000 at the end of one year; $40,000 at the end of three years and a final payment at the end of five years. Interest rate is 20% compounded annually. a) Construct the cash flow diagram if paid on installment basis: b) What will be the amount of the final payment?
A company manager is faced with an investment proposal of Rp. 100,000,000, - with a period of 4 years and cash inflows every year as follows: Year 1 Rp. 40,000,000 Year 2 Rp. 30,000,000 Year 3 Rp. 30,000,000 Year 4 Rp. 20,000,000 Requested: a. With an interest rate of 12%, with the NPV and PI method, assist the manager in making decisions. Whether the project is accepted or rejected. b. If it is known that the second interest rate is 20% and the cost of capital offered is 17%, calculate the IRR, and make a decision whether to accept or reject the project.
Imagine that you won $100 million in the lottery and were offered the choice between two payment plans: Plan A: Receive $61 million in a lump sum today Plan B: Receive an initial payment of $1.5 million today and annual payments that increase by 5% annually over the next 29 years (30 payments total) a. Determine the net present value of each plan without discounting. Which plan is the better option? b. Assuming an interest rate of 4%, determine the future value of each plan at the end of the 29 years with discounting. Which plan is the better option?

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