Question 1: I-SEE-U Inc., a maker of CCTV cameras, is considering a hardware marketing chain to sell its cameras. As per the deal, I-SEE-U will be paid $35,000 and $10,000 at the end of years 1 and 2 and to make annual year-end payments of $5,000 in years 3 through 9. A final payment of $20,000 would be due at the end of year 10. A second company has offered to market the cameras for a one-time payment of $80,000 right away. If I-SEE-U uses a 12% required return, which offer should it accept? Support your asnwer with relavent calculations. Question 2: You have decided to endow your favorite university with a scholarship. It is expected to cost $15,000 per year to attend the university into perpetuity. You expect to give the university the endowment in 5 years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be 8% for all future time periods. a) How large must the endowment be? b) How much must you deposit at the end of each of the next 5 years to accumulate the required amount? Question 3: Paul Atreides wants to save money to meet three objectives. First, he would like to be able to retire 20 years from now with retirement income of $15,000 per month for 20 years, with the first payment received 20 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $100,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $100,000 to Chani, his girlfriend. He can afford to save $3,000 per month for the next 10 years. If he can earn an 10 percent EAR before he retires and an 9 percent EAR after he retires, how much will he have to save each month in years 11 through 20? Note: To provide coherence and organization to your work, arrange your work for this question as follows: Step 1: Convert both EARS to annual nominal rates Step 2: Compute the amount needed at the 20-year mark from now Step 3: Compute the amount in hand at the 10-year mark from now Step 4: Compute the amount still required at the 10-year mark Step 5: Compute the shortage/surplus, if any, and compute the required monthly savings between years 11 through 20.

Question 1: I-SEE-U Inc., a maker of CCTV cameras, is considering a hardware marketing chain to sell its cameras. As per the deal, I-SEE-U will be paid $35,000 and $10,000 at the end of years 1 and 2 and to make annual year-end payments of $5,000 in years 3 through 9. A final payment of $20,000 would be due at the end of year 10. A second company has offered to market the cameras for a one-time payment of $80,000 right away. If I-SEE-U uses a 12% required return, which offer should it accept? Support your asnwer with relavent calculations. Question 2: You have decided to endow your favorite university with a scholarship. It is expected to cost $15,000 per year to attend the university into perpetuity. You expect to give the university the endowment in 5 years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be 8% for all future time periods. a) How large must the endowment be? b) How much must you deposit at the end of each of the next 5 years to accumulate the required amount? Question 3: Paul Atreides wants to save money to meet three objectives. First, he would like to be able to retire 20 years from now with retirement income of $15,000 per month for 20 years, with the first payment received 20 years and 1 month from now. Second, he would like to purchase a cabin in Rivendell in 10 years at an estimated cost of $100,000. Third, after he passes on at the end of the 20 years of withdrawals, he would like to leave an inheritance of $100,000 to Chani, his girlfriend. He can afford to save $3,000 per month for the next 10 years. If he can earn an 10 percent EAR before he retires and an 9 percent EAR after he retires, how much will he have to save each month in years 11 through 20? Note: To provide coherence and organization to your work, arrange your work for this question as follows: Step 1: Convert both EARS to annual nominal rates Step 2: Compute the amount needed at the 20-year mark from now Step 3: Compute the amount in hand at the 10-year mark from now Step 4: Compute the amount still required at the 10-year mark Step 5: Compute the shortage/surplus, if any, and compute the required monthly savings between years 11 through 20.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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