The firm is planning to shift its servers to Amazon Web Services (AWS). AWS reserved instances have several payment options; the management has decided to either go with a No Upfront (monthly payment option) or an All upfront payment options. Firm would like to reserve some servers for 1 year term and some servers for 3-year term. (a) The Image P2.1 has the pricing structure for the Ohio datacenter for Linux "a1.4xlarge" server for Standard 1-Year Term. Assume that the monthly payments are done at the end of the month. Compute the monthly payments' present value and suggest whether the firm should opt for No Upfront or All upfront payment option. Hint: If the monthly payment's present value is more than the upfront payment, you should prefer the upfront payment option. Firm's annualised required rate of return is 10% pa. (i) Write a formula in cell C6 to compute the monthly required rate of return. (ii) Enter the values of number of periods, Monthly payments and Type in cells C7, C8 and C10 respectively. (iii) Write a formula in cell C12 to compute the present value of the monthly paments. (iv) In cell C13, select your recommended payment option from the dropdown.
The firm is planning to shift its servers to Amazon Web Services (AWS). AWS reserved instances have several payment options; the management has decided to either go with a No Upfront (monthly payment option) or an All upfront payment options. Firm would like to reserve some servers for 1 year term and some servers for 3-year term. (a) The Image P2.1 has the pricing structure for the Ohio datacenter for Linux "a1.4xlarge" server for Standard 1-Year Term. Assume that the monthly payments are done at the end of the month. Compute the monthly payments' present value and suggest whether the firm should opt for No Upfront or All upfront payment option. Hint: If the monthly payment's present value is more than the upfront payment, you should prefer the upfront payment option. Firm's annualised required rate of return is 10% pa. (i) Write a formula in cell C6 to compute the monthly required rate of return. (ii) Enter the values of number of periods, Monthly payments and Type in cells C7, C8 and C10 respectively. (iii) Write a formula in cell C12 to compute the present value of the monthly paments. (iv) In cell C13, select your recommended payment option from the dropdown.
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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Question
5. The firm is planning to shift its servers to Amazon Web Services (AWS). AWS reserved instances have several payment options; the management has decided to either go with a No Upfront (monthly payment option) or an All upfront payment options.
Firm would like to reserve some servers for 1 year term and some servers for 3-year term.
(a) The Image P2.1 has the pricing structure for the Ohio datacenter for Linux "a1.4xlarge" server for Standard 1-Year Term.
Assume that the monthly payments are done at the end of the month.
Compute the monthly payments'
Hint: If the monthly payment's present value is more than the upfront payment, you should prefer the upfront payment option.
Firm's annualised required
(i) Write a formula in cell C6 to compute the monthly required rate of return.
(ii) Enter the values of number of periods, Monthly payments and Type in cells C7, C8 and C10 respectively.
(iii) Write a formula in cell C12 to compute the present value of the monthly paments.
(iv) In cell C13, select your recommended payment option from the dropdown.
Transcribed Image Text:minor
4
5
6
A
7
8
B
5. The firm is planning to shift its servers to Amazon Web Services (AWS). AWS reserved instances have several payment options; the
management has decided to either go with a No Upfront (monthly payment option) or an All upfront payment options.
1 Firm would like to reserve some servers for 1 year term and some servers for 3-year term.
9
10
11
(a) The Image P2.1 has the pricing structure for the Ohio datacenter for Linux "a1.4xlarge" server for Standard 1-Year Term.
Assume that the monthly payments are done at the end of the month.
Compute the monthly payments' present value and suggest whether the firm should opt for No Upfront or All upfront payment option.
2 Hint: If the monthly payment's present value is more than the upfront payment, you should prefer the upfront payment option.
Firm's annualised required rate of return is 10% pa.
(i) Write a formula in cell C6 to compute the monthly required rate of return.
(ii) Enter the values of number of periods, Monthly payments and Type in cells C7, C8 and C10 respectively.
(iii) Write a formula in cell C12 to compute the present value of the monthly paments.
3 (iv) In cell C13, select your recommended payment option from the dropdown.
12
13
14
с
Annual Required Rate
Monthly Required Rate
Number of periods (Nper)
Monthly Payments (PMT)
Future Value (FV)
Type
Present Value (PV)
Your recommendation
D
10.000%
E
0
Select from the list
F
Image P2.1
STANDARD 1-YEAR TERM
Payment Option
No Upfront
Partial Upfront
All Upfront
Upfront
$0
$1,072
$2,102
Monthly
G
$187.61
$89.35
$0.00
H
Correct Answer
Present Value (PV)
Present Value (PV)
OR
($2,133.97)
$2,133.97
K
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