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58.
The Wine Press is considering a project which has an initial cash
requirement of $187,400. The project will yield cash flows of $2,832 monthly
for 84 months. What is the rate of return on this project?
59.
Your insurance agent is trying to sell you an annuity that costs $230,000
today. By buying this annuity, your agent promises that you will receive
payments of $1,225 a month for the next 30 years. What is the rate of return
on this investment?
60.
You have been investing $250 a month for the last 13 years. Today, your
investment account is worth $73,262. What is your average rate of return on
your investments?
61.
Will has been purchasing $25,000 worth of New Tek stock annually for the
past 15 years. His holdings are now worth $598,100. What is his annual rate
of return on this stock?
62.
Your father helped you start saving $20 a month beginning on your 5th
birthday. He always made you deposit the money into your savings account
on the first day of each month just to "start the month out right." Today
completes your 17th year of saving and you now have $6,528.91 in this
account. What is the rate of return on your savings?
63.
Today, you turn 23. Your birthday wish is that you will be a millionaire by
your 40th birthday. In an attempt to reach this goal, you decide to save $75 a
day, every day until you turn 40. You open an investment account and
deposit your first $75 today. What rate of return must you earn to achieve
your goal?
64.
You just settled an insurance claim. The settlement calls for increasing
payments over a 10-year period. The first payment will be paid one year
from now in the amount of $10,000. The following payments will increase by
4.5 percent annually. What is the value of this settlement to you today if you
can earn 8 percent on your investments?
65.
Your grandfather left you an inheritance that will provide an annual income
for the next 10 years. You will receive the first payment one year from now
in the amount of $3,000. Every year after that, the payment amount will
increase by 6 percent. What is your inheritance worth to you today if you
can earn 9.5 percent on your investments?
66.
You just won a national sweepstakes! For your prize, you opted to receive
never-ending payments. The first payment will be $12,500 and will be paid
one year from today. Every year thereafter, the payments will increase by
3.5 percent annually. What is the present value of your prize at a discount
rate of 8 percent?
67.
A wealthy benefactor just donated some money to the local college. This
gift was established to provide scholarships for worthy students. The first
scholarships will be granted one year from now for a total of $35,000.
Annually thereafter, the scholarship amount will be increased by 5.5 percent
to help offset the effects of inflation. The scholarship fund will last
indefinitely. What is the value of this gift today at a discount rate of 9
percent?
68.
Southern Tours is considering acquiring Holiday Vacations. Management
believes Holiday Vacations can generate cash flows of $187,000, $220,000,
and $245,000 over the next three years, respectively. After that time, they
feel the business will be worthless. Southern Tours has determined that a
13.5 percent rate of return is applicable to this potential acquisition. What is
Southern Tours willing to pay today to acquire Holiday Vacations?
69.
You are considering two savings options. Both options offer a 7.4 percent
rate of return. The first option is to save $900, $1,500, and $3,000 at the end
of each year for the next three years, respectively. The other option is to
save one lump sum amount today. If you want to have the same balance in
your savings account at the end of the three years, regardless of the savings
method you select, how much do you need to save today if you select the
lump sum option?
70.
Your parents have made you two offers. The first offer includes annual gifts
of $10,000, $11,000, and $12,000 at the end of each of the next three years,
respectively. The other offer is the payment of one lump sum amount today.
You are trying to decide which offer to accept given the fact that your
discount rate is 8 percent. What is the minimum amount that you will accept
today if you are to select the lump sum offer?
71.
You are considering changing jobs. Your goal is to work for three years and
then return to school full-time in pursuit of an advanced degree. A potential
employer just offered you an annual salary of $41,000, $43,000, and $46,000
a year for the next three years, respectively. All salary payments are made
as lump sum payments at the end of each year. The offer also includes a
starting bonus of $3,000 payable immediately. What is this offer worth to
you today at a discount rate of 6.75 percent?
72.
You are considering a project which will provide annual cash inflows of
$4,500, $5,700, and $8,000 at the end of each year for the next three years,
respectively. What is the present value of these cash flows, given a 9
percent discount rate?
73.
You just signed a consulting contract that will pay you $38,000, $52,000,
and $85,000 annually at the end of the next three years, respectively. What
is the present value of these cash flows given a 10.5 percent discount rate?
74.
You have some property for sale and have received two offers. The first
offer is for $89,500 today in cash. The second offer is the payment of
$35,000 today and an additional $70,000 two years from today. If the
applicable discount rate is 11.5 percent, which offer should you accept and
why?
75.
Your local travel agent is advertising an upscale winter vacation package for
travel three years from now to Antarctica. The package requires that you
pay $20,000 today, $35,000 one year from today, and a final payment of
$45,000 on the day you depart three years from today. What is the cost of
this vacation in today's dollars if the discount rate is 9.75 percent?
76.
One year ago, Deltona Motor Parts deposited $16,500 in an investment
account for the purpose of buying new equipment three years from today.
Today, it is adding another $12,000 to this account. The company plans on
making a final deposit of $20,000 to the account one year from today. How
much will be available when it is ready to buy the equipment, assuming the
account pays 5.5 interest?
