Problems from Corporate Finance

Topics: Net present value, Cash flow, Time value of money Pages: 4 (1021 words) Published: November 20, 2012
Problems form Corporate Finance
1. Compute the following:
Present Value| Years| Interest Rate| Future Value|
$227,382| 20| 5| |
| 16| 17| $886,073|
$25,000| 18| | $143,625|
$1,941| | 5| $3,700|

2. At 9 percent interest, how long does it take to double your money? To quadruple it?

3. In 2006, a gold $3 coin minted in 1879 was auctioned for $9.000. For this to have been true, what was the annual increase in the value of the coin?

4. You can earn 0.45 percent per month at your bank. If you deposit $1.500, how long must you wait until your account has grown to $3,600?

5. You need $75,000 in 10 years. If you can earn 0.55 percent per month, how much will you have to deposit today?

6. If you put up $20,000 today in exchange for a 8.5 percent, 12-year annuity, what will the annual cash flow be?

7. Bath's Bank offers you a $50,000, seven-year term loan at 8 percent annual interest. What will your annual loan payment be?

8. Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. If the required return on this investment is 7percent, how much will you pay for the policy? Suppose Curly's told you the policy cost $400.000. At what interest rate would this be a fair deal?

9. First National Bank charges 12.4 percent compounded monthly on its business loans. First United Bank charges 12.7 percent compounded semiannually. As a potential borrower, which bank would you go to for a new loan?

10. You are to make monthly deposits of $300 into a retirement account that pays 12 percent interest compounded monthly. If your first deposit will be made one month from now. How large will your retirement account be in 30years?

11. You have an investment that will pay you 1.05 percent per month. How much will you have per dollar invested in one year? In two years?

12. You want to buy a new sports car from Muscle Motors...
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