You are thinking of building a new machine that will save you $4,000 in the first year, The machine will then begin to wear out so that the savings decline at a rate of 3% per year forever. What is the present value of the savings if the interest rate is 3% per year? The present value of the savings is $ (Round to the nearest dollar.)

You are thinking of building a new machine that will save you $4,000 in the first year, The machine will then begin to wear out so that the savings decline at a rate of 3% per year forever. What is the present value of the savings if the interest rate is 3% per year? The present value of the savings is $ (Round to the nearest dollar.)

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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You’d like to buy a small ranch when you retire in 38 years. You estimate that in 38 years you’ll need $9 million to do so. If your savings can earn 1.0% per month, how much will you need to save each month (for 38 years), starting next month, in order to reach your goal? Round to the nearest cent. [Hint: We are trying to solve for the cash flows of an annuity. The formula we need to use is dictated by whether we are given the PV or the FV of that annuity. Also, we are given the monthly interest rate, which is i/m in our formulas.]
You have an opportunity to make an investment that will pay $ 300 at the end of the first year, $ 100 at the end of the second year, $ 200 at the end of the third year, $ 400 at the end of the fourth year, and $500 at the end of the fifth year. a. Find the present value if the interest rate is 9 percent. (Hint: You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the =NPV function in Excel or to use your CF key on a financial calculator —but you'll want to check your calculator's manual before you use this key. Keep in mind that with the =NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present. With a financial calculator, you should keep in mind that CF0 is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF0 =0.) b. What would happen to the…
Suppose you invest $210,000 in an annuity that returns 6 annual payments, with the first payment one year from now and each subsequent payment growing by 5%. At an interest rate of 8%, how much is the first annual payment you receive? Equivalent problem structure (as a borrower): Suppose you borrow $210,000 to be paid back over 6 years with the first payment one year from now and each subsequent payment growing by 5%. At an interest rate of 8%, how much is the first annual payment? Please round your answer to the nearest hundredth.
I need a detailed explanation and assistance to solve this problem: An investment offers $6,800 per year for 20 years, with the first payment occuring one year from now. a) If the required return is 7%, what is the present value of the investment? b) at 7% return, what would the value be today, if the payments occured for 45 years? c) What would the present value be, if the payments occured for 70 years? d) What would the present value be, if the payments occured forever?
Suppose you are contemplating buying a collector's edition of a John Maynard Keynes Action Figure. You would have to make a down payment today of $1,000 and then pay $1,875 at the end of two years from now (ie year 2). If you buy it today, a year from today ( ie year 1), you would sell the Action Figure for $2,750. Your minimum acceptable rate of return (MARR) is 20%. Find the positive breakeven interest rates on your potential investment. b. Determine whether this is a pure investment. (Use only one breakeven interest rate in your calculation – doesn't matter which one). C. Suppose you use the modified internal rate of return MIRR to evaluate investments. Calculate MIRR and determine if you should buy the Action Figure. (Note: use MARR when evaluating both cash inflows and cash outflows). d. Find the True IRR (You may assume that i is such that PB1 >0) and determine if you should buy the Action Figure.
Suppose you considering investing $33 to earn $5.9 every year for 9 years. If the annual interest rate is 4.8%, what is the payback of this project? Suppose you considering investing $22 to earn $4.0 every year for 7 years. If the annual interest rate is 3.4%, what is the payback of this project?
You just deposited $6, 500 in an investment account and will deposit $ 5000 more four years from now. Use tabulated factor values to determine how much will be in the account 11 years from now if the rate of return is 10% per year? 11 years from now, the account will have $.
You are thinking of buildinga new machine that will save you $5,000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 1% per year forever. What is the present value of the savings if the interest rate is 6% per year? The present value of the savings is $. (Round to the nearest dollar.) -12.. Ereen Sho 529.00 O Time Remaining: 00:25:34 Next etv DD DIL 80 888 FR F7 F6 F5 F4 esc F2 F3 & 2$ % @ #3 7 8. 2 3 4 P Y U W E R Q
Suppose you have $10,000 and a choice of two alternatives: A) put the money in a savings account that pays 4% per year, and B) buy a stock that has a 50% chance to gain 15% in value after 1 year, and a 50% chance to lose 5%. What will be the expected return for either alternative, and which one would you choose? Why?

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