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 | …show more content…
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)
|Investment |Cost savings |Net cash flows |PV @10% |Discount Rate |Year |
| 150,000.00 | | 150,000.00 |(150,000.0000) | |0 |
| | 40,000.00 | 40,000.00 |36,360.00 |0.909 |1 |
| | 40,000.00 | 40,000.00 |33,040.00 |0.826 |2 |
| | 40,000.00 | 40,000.00 |30,040.00 |0.751 |3 |
| | 40,000.00 | 40,000.00 |27,320.00 |0.683 |4