Chapter 04
Problem 01
Input Area:
Initial cost of banking facility $3,300,000.00
Initial other organizing expenses $500,000.00
Year 1 revenue $400,000.00
Year 1 operating expense
$160,000.00
Annual growth rate in revenues 4.00%
Annual growth rate in expenses 2.00%
Required annual rate of return 10.00%
Output Area:
Decision Criteria:
Chapter 04
Problem 02
Input Area:
Initial cost of property $1,750,000.00
Initial construction costs $2,750,000.00
Year 1 revenue $1,600,000.00
Year 1 operating expense
$800,000.00
Annual growth rate in revenues 0.00%
Annual growth rate in expenses 0.00%
Required annual rate of return 15.00%
Output Area:
Decision Criteria:
Chapter 04
Problem 03
Input Area:
Expected return: New branch office 12.00%
Expected return: Existing facilities 10.00%
Standard Deviation: New branch office 10.00%
Standard Deviation: Existing facilites 5.00%
Correlation coefficient with other services 0.15
% of total assets: New branch office 20.00%
% of total assets: Existing facilities 80.00%
Output Area:
Estimated total combined rate of return 10.40%
Standard deviation of combined returns 4.73%
Chapter 04
Problem 05
Input Area:
Expected return: Lily branch 15.00%
Expected return: Daisy Branch 15.50%
Expected return: Existing facilities 12.00%
Standard Deviation: Lily branch 6.50%
Standard Deviation: Daisy branch 7.50%
Standard Deviation: Existing facilites 5.00%
Correlation coefficient: Lily branch with other services 0.50
Correlation coefficient: Daisy branch with other services 0.30
% of total assets: Lily branch 5.00%
% of total assets: Daisy branch 5.00%
% of total assets: Existing facilities 95.00%
Output Area:
Lilly Branch and Existing facilities
Estimated total combined rate of return 12.15%
Standard deviation of combined returns 4.92%
Daisy Branch and Existing facilities
Estimated total combined rate of return 12.18%
Standard deviation of combined returns 4.88%
Chapter 04
Problem 06
Input Area:
# of ATMs 2
Initial cost for each ATM $37,000.00
Installation cost for each ATM $15,000.00
# of transactions per year 50,000
Savings per transaction $0.30
Cost of capital 10.00%
Output Area:
Year Initial Outlay Savings Net Cash Flow
Decision Criteria: