Calculating Present Value

Free cash flows of the project for next five years can be calculated by adding depreciation values and subtracting changes in working capital from net income. In 2010, there will be a cash outflow of $2.2 million as capital expenditure. In 2011, there will be an additional one time cash outflow of $300,000 as an advertising expense. Using net free cash flow values for next five years and discount rate for discounting, NPV for the project comes out to be $2907, 100. The rate of return at which net present value becomes zero i.e.

Poor Dog, Inc. borrowed $135,000 from the bank today. They must repay this money over the next six years by making monthly payments of $2,215.10. What is the interest rate on the loan? Express your answer with annual compounding.

a) Assuming the opportunity interest rate is 6%, what is the present value of the second alternative?

1. Consider the $50,000 excess cash. Assume that Gary invests the funds in one-year CD.

8. What is the net present value of the following cash flows discounted at 12%?

FVN = FV1= PV × (1 +I)N = $500 x (1 + 0.08) = $500 x 1.08 = $540

12. Today, you deposit $10,750 in a bank account that pays 3 percent simple interest. How much interest will you earn over the next 7 years?

3. Assume that 11% is the market rate of interest in on January 1, 1975. Compute the present value at January 1, 1975 of all payments that will be made on

The net present value of this project if T-Mobile's discount rate is 4% is therefore as follows:

Present value: John Hsu wants to start a business in 12 years. He hopes to have $130,000 at that time to invest in the business. To reach his goal, he plans to invest a certain amount today in a bank CD that will pay him 7.50 percent annually. How much will he have to invest today to achieve his target? (Round to the nearest dollar.)

get the PV of an Annuity of 70, at 8.5% for 7 yrs which gives us 358.30. Then get the PV of 1,000 due in 7 yrs at 8.5% which gives us 564.93.

14. You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the drug's profits will be $2 million in its first year and that this amount will grow at a rate of 5% per year for the next 17 years. Once the patent expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per year?

2. If the interest rate is 2.5%, $870 received at the end of 8 years is worth how much today?

8. Jane wants to have $200,000 in an account in 20 years. If her account earns 11 percent per annum over the accumulation period, how much must she save per year (end of year) to have the $200,000?

1. $5,500 deposited four years ago has grown to $7,000. What semiannual compounded rate of interest