You have just entered a two-year part-time Executive MBA. The tuition fee is $15,000 per year payable at the beginning of each year. Before the program you eamed $40, 000 per year. Your expected salary after graduation. is $55, 000 per year. You can invest your money at 8%. Assume that you will work for 30 years after graduation. The salary dif

You have just entered a two-year part-time Executive MBA. The tuition fee is $15,000 per year payable at the beginning of each year. Before the program you eamed $40, 000 per year. Your expected salary after graduation. is $55, 000 per year. You can invest your money at 8%. Assume that you will work for 30 years after graduation. The salary dif

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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Suppose you are starting a PhD program. The university has agreed to waive your tuition, cover all of your living expenses, and pay you an additional stipend of $2,000 at the end of each month, as long as you teach one course per semester over the course of five years. If your savings account is able to earn 5.5% per year for the five years that you will be in this program, how much will you have accumulated in your savings account by the end of the program if interest is compounded on a monthly basis? $104,705.67 $137,761.65 $34,899.71 $866,900.74
You have just finished your undergraduate degree and you have two career options: Option 1: Accepting a job offer with the starting salary of $75,000 per year (paid at the end of the year) and an annual raise of 2% pa (guaranteed). You will work in this company for 40 years. Option 2: Choosing a graduate program which will cost you $28,000 per year for the next two years (paid at the beginning of each year). Following the graduate school, you can get a job that offers the initial salary of $85,000 (paid at the end of the Year 3) with an annual raise of 3% pa (guaranteed). You will work in this company for 38 years. a. If you use the discount rate of 10% pa, which option is more lucrative for you? b.At what discount rate will you be indifferent between these two career options? (Hint: You need to use the incremental cash flows to answer this question) c. If option 2 (i.e., work after grad school) comes with a signing bonus (paid at the beginning of Year 3), at what signing bonus will…
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Assume that you will have a 10-year, $14,000 loan to repay when you graduate from college next month. The loan, plus 11 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $2,377 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $2,377). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.) Annual Interest Expense @11% Reduction Annual Payment in Unpaid Balance Unpaid Balance Interest Period Date of Graduation Year 1 2.377 Year 2 2,377 Year 3 2,377
Assume that you will have a 10-year, $20,000 loan to repay when you graduate from college next month. The loan, plus 10 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $3,255 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $3,255). Prepare an amortization schedule showing how much money you will need to save to pay the entire unpaid balance of your loan three years after your graduation. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.) Interest Period Date of Graduation Year 1 Year 2 Year 3 Annual Payment Annual Interest Expense @10% a. Actual net-of-tax interest cost b. Effective interest rate Reduction in Unpaid Balance Unpaid Balance One of the advantages of borrowing is that interest is deductible for income tax purposes. a.…
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You have an outstanding student loan with required payments of $600 per month for the next 4 years. The interest rate on the loan is 9.50% APR (monthly). You are considering making an extra payment of $100 today (i.e., you will pay an extra $100 that you are not required to pay). If you are required to continue to make payments of $600 per month until the loan is paid off, what is the amount of your final payment? What effective rate of return (expressed as an APR with monthly compounding) have you earned on the $100? (Note: Be careful not to round any intermediate steps less than six decimal places.) If you are required to continue to make payments of $600 per month until the loan is paid off, what is the amount of your final payment? The final payment is $ (Round to the nearest cent.)
Assume that you will have a 10-year, $10,000 loan to repay to your parents when you graduatefrom college next month. The loan, plus 8 percent annual interest on the unpaid balance, is to berepaid in 10 annual installments of $1,490 each, beginning one year after you graduate. You haveaccepted a well-paying job and are considering an early settlement of the entire unpaid balance injust three years (immediately after making the third annual payment of $1,490).Prepare an amortization schedule showing how much money you will need to save to pay yourparents the entire unpaid balance of your loan three years after your graduation. (Round amountsto the nearest dollar.)
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