You are the vice president of finance for a manufacturer of scuba diving gear. The company is planning a major plant expansion in 5 years. You have decided to start a sinking fund to accumulate the funds necessary for the project. Your company's investments yield 8% compounded quarterly. It is estimated that $3,000,000 in today's dollars will be required; however, the inflation rate on construction costs and plant equipment is expected to average 6% per year for the next 5 years. MY NOTES ASK YOUR TEACHE Forty Years of Changing Inflation Rates 11.0 10.5 9.0 7.0 7.0 -6.5 5.5 5.0 5.0 4.0 3.6 3.6 3.0 3.0 3.0 3.4 Iilili 2,8 2.4 3.1 2.5- 2.6 2.0 2.1 1.0- 1.5 0.12 -1.0 -0.34 *93 "95 "97 "99 01 "03 05 "07 "09 11 "77 79 81 '83 "85 "87 "89 91 *13 15 17 Year (a) Use the compound interest concept from Chapter 11 to determine how much (in $) will be required for the project, taking inflation into account. (Use Table 11-1. Round your answer to the nearest cent.) (b) What sinking fund payments (in $) will be required at the end of every 3-month period to accumulate the necessary funds? (Use Table 12-1. Round your answer to the nearest cent.) 24

You are the vice president of finance for a manufacturer of scuba diving gear. The company is planning a major plant expansion in 5 years. You have decided to start a sinking fund to accumulate the funds necessary for the project. Your company's investments yield 8% compounded quarterly. It is estimated that $3,000,000 in today's dollars will be required; however, the inflation rate on construction costs and plant equipment is expected to average 6% per year for the next 5 years. MY NOTES ASK YOUR TEACHE Forty Years of Changing Inflation Rates 11.0 10.5 9.0 7.0 7.0 -6.5 5.5 5.0 5.0 4.0 3.6 3.6 3.0 3.0 3.0 3.4 Iilili 2,8 2.4 3.1 2.5- 2.6 2.0 2.1 1.0- 1.5 0.12 -1.0 -0.34 93 "95 "97 "99 01 "03 05 "07 "09 11 "77 79 81 '83 "85 "87 "89 91 13 15 17 Year (a) Use the compound interest concept from Chapter 11 to determine how much (in $) will be required for the project, taking inflation into account. (Use Table 11-1. Round your answer to the nearest cent.) (b) What sinking fund payments (in $) will be required at the end of every 3-month period to accumulate the necessary funds? (Use Table 12-1. Round your answer to the nearest cent.) 24

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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Company ABC invests in a long-term project that will start generating cash flows 10 years from now (and will then continue generating cash flows forever). The first cash flow is going to be equal to $22 million. Cash flows will then grow 2% per year forever. If the project costs $460 million today, is it a good investment if interest rates are (and are going to be forever) equal to 5%?
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An investor wants to do capital budgeting for his new investment project. He has the following information: IRS will allow the investor to depreciate the investment using straight-line over 10 years. The marginal tax rate will be 20% over the next 5 years & it will be 10% from the 6th to the 10th year. The investor expects that the terminal value for the investment is $40,000 at the end of 6 years.(a 6-year project) What is the after- tax terminal value of this investment if the initial cost is $60,000? $39,200 O $36,800 O $37,600 $38,400 O None of the Answers
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Your start-up company's net profit next year will be $50,000, and you then expect that to increase by $5,000 for each of the following 4 years. You now are asking the bank for a $25,000 loan to buy some new equipment, and the loan officer asks you for the current equivalent annual worth of your net profit over your projection period -- WITHOUT the new equipment. Your interest rate is 3% per year. What is the amount of that equivalent annual worth? $61,714 $57,316 $84,754 $59,705 $82,316
Help me please
Peaceful Cruises wants to build a new cruise ship that has an initial investment of $200 million. It is estimated to provide an annual cash flow over the next 15 years of $24 million per year. The discount rate is 7%. What is the discounted payback period? Enter your answer rounded to two decimal places
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