Present Value and Capital Budgeting

Solving for r in the above equation we get 14.318% as the effective interest rate.

academic year interest rate of 3.76 percent would pay a 5,032 dollars interest over 10 years,

Mission: Standardize and formalize the capital budgeting process. The CERs and capital budgeting process were implemented so that a more formal process of requesting capital expenditure and approving them would be applied. All this was put in place to support cash flow targets and maintain Stryker’s 20% growth benchmark.

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?

24. Mobilee Oil Company accepted a $10,000, 120-day note, dated March 3, at 8.5% to settle a past due accounts receivable. Mobilee Oil discount the note to raise cash on May 10 at a discounted rate of 9%. What proceeds did Mobilee Oil receive?

Uncollectible accounts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $35,000 of accounts receivable will be uncollectible. Which of the following will be the amount of Uncollectible accounts expense? 35000 -4500 = 30,500

c) The present value of $500 to be received in one year when the opportunity cost rate is 8 percent (discounting):

The present value of an outlay in perpetuity for a particular project can be calculated as follows:

Now lets go to the 30-Year side, take a look at cell (X-131), this figure represents the total interest at a 6% interest rate =

ii-We would like to know how changing the discount rate would affect the NPV of each project. For both projects we have that as the discount rate decreases each project increases in value, and when the discount rate increases both

1. What is the expected customer lifetime value of a newly acquired customer? Use an annual discount rate of 10%.

The semi-annual compounded interest rate is 5.2% (a six-month discount rate of 5.2/2 = 2.6%). (15 points)

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

Assume that the annual payments in the sixth year is equal to the rental payment in the fifth year ( 112.9 and 86.0) and the remainder of the lump sum values (54.6 and 17.8) is due in the seventh year. With a discount rate of 5.4%, the present values of the rental payments for the years 2006 and 2007 are as follows: