Please post the answers (and show your work) in the assignments section by midnight the last day of the week assigned.

1. Calculate the future value of 1,535 invested today for 8 years at 6 percent. (5 points) $1535 * 1.5938 = $2,446

2. What is the total present value of the following cash stream, discounted at 8 percent? (5 points) |Year |Amount |Rate |PV | |1 | $ 400.00 |0.926 | $ 370.40 | |2 | $ 750.00 |0.857 | $ 642.75 | |3 | $ 945.00 |0.794 | $ 750.33 | |4 | $ 145.00 |0.735 | $ 106.58 | |5 | $ 78.00 |0.681 | $ 53.12 | | | |Total | $ 1,923.17 |

3. If you invested $2,000 per year into an IRA for 30 years and received 6 percent return each year, what would the account balance be in 30 years? (8 points) $2,000 * 79.058 = $158,116.37

4. A friend gives you a proposition. If you give him 1,500 dollars today, he will guarantee your receive 12 percent a year for the next 5 years. How much money will you receive from him at the end of 5 years? (8 points) $1,500 * 1.7623 = $2,643.51

5. You want to buy a new Computer Aided Design (CAD) system for your business. The cost of the system is $150,000 and you expect to save over $40,000 per year in reduced labor costs. Please calculate the net present value of the CAD if your required return is 10 percent and the life of the system is expected to be 5 years. (12 points)

...By: Dana Angeline F. Agao
CASH FLOW STATEMENT
OBJECTIVES:
To provide information about an entity's cash
receipts and cash payments during a period.
To provide information on a cash basis about its
operating, investing, and financing activities. The
statement of cash flows therefore reports cash
receipts, cash payments, and net change in cash
resulting from operating, investing, and financing
activities of an enterprise during a period, in a
format that reconciles the...

...Deriving the Dividend Discount Model in the Intermediate Microeconomics Class
Stephen Norman Jonathan Schlaudraff Karianne White Douglas Wills*
May 2012
Abstract This paper shows that the dividend discount model can be derived using the basic intertemporal consumption model that is introduced in a typical intermediate microeconomic course. This result will be of use to instructors who teach microeconomics to finance students in that it demonstrates the...

...Dividend discount model
Dividend discount model (DDM) is a way of valuing a share based on the net present value of the dividends that you expect to receive in the future. According to the DDM, dividends are the cash flows that are returned to the shareholder.
FY 2002 2003 2004 2005 2006 2007F 2008F 2009F
Share price 0.155 0.150 0.230 0.370 0.450 0.450
Dividends per share 0.005 0.012 0.014 0.012 0.013 0.019 0.0178 0.020
Dividend Growth 0.0833...

...The discount rate
Main article: Discount rate
The rate used to discount future cash flows to their present values is a key variable of this process.
A firm's weighted average cost of capital (after tax) is often used, but many people believe that it is appropriate to use higher discount rates to adjust for risk or other factors. A variable discount rate with higher rates applied to cash flows occurring further along...

...as follows:
Year Cash flows
1 2500
2 2500
3 2500
4 2500
5 2500
6 2500
Calculate Pay Back Period (PBP)
When the cash flows are not uniform
1. There are two Proposals. Proposal A and Proposal B. Both cost the amount of $ 60,000. The discount rate is 10%. The cash flows before depreciation and tax are as follows:
Year Proposal A Proposal B
$ $
0 (60,000) (60,000)
1 18,000 19,000
2 15,000...

...Finance 3303 Business Finance Chapter 11 Practice Problems
1. Two investment opportunities have the following expected cash flows. If your minimum required return is 27%, which proposal would be the best based on the Net Present Value evaluation method?
Investment A Investment B
Year 0 $( 567,000) $( 577,000)
Year 1 $ 254,000 $ 256,000
Year 2 $ 287,000 $ 281,000
Year 3 $ 260,000 $ 290,000
Year 4 $ 155,000 $...

...RISK-ADJUSTED DISCOUNT RATES and LIABILITY BETA
RUSSELL E. BINGHAM T H E H A R T F O R D FINANCIAL SERVICES G R O U P
Table of Contents
Page 2 3 5 7 8 11 12 13 14 14 15 16 17 17
18
Subject Abstract 1. Summary 2. Total Return Model 3. After-Tax Discounting 4. Derivation of Risk-Adjusted Discount Rate and Liability Beta Figure l : Baseline Risk / Return Line vs Leverage 5. Liability Beta Figure 2: Equity vs Liability Beta Figure 3: Equity Beta vs...

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