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The neighbourhood grocery store owned by Raoul needs $22,500 to upgrade its fixtures and coolers. If Raoul contributes $3,000 at the start of every quarter into a fund earning 5.4% compounded quarterly, how long will it take him to save up the needed funds for his store's upgrades?
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- Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?MarySullivan, capital outlay manager for Waxy Widgets, has been instructed toestablish a contingency fund to cover the expenses over the next two years (24months) associated with repairing defective widgets from a new production process.Waxy Widgets’ controller wants to make equal monthly cash deposits into thisfund. If Mary faces the following monthly repair costs and has $1 million tostart the fund today, what will be her monthlypayments into the fund in order to assume that all repair costs will becovered? Mary will make her first payment one month from today, and the fundwill earn 6 percent, compounded monthly. Months Repair Costs perMonth 1–4 $500,000 5–12 $250,000 13–24 $100,000Mary Sullivan, capital outlay manager for Waxy Widgets, has been instructed to establish a contingency fund to cover the expenses over the next two years (24 months) associated with repairing defective widgets from a new production process. Waxy Widget’s controller wants to make equal monthly cash deposits into this fund. If Mary faces the following monthly repair costs and has $1 million to start the fund today, what will be her monthly payments into the fund in order to assume that all repair costs will be covered? Mary will make her first payment one month from today, and the fund will earn a nominal rate of 6 percent, compounded monthly. Months Repair Costs per month 1-4 $500,000 5-12 $250,000 13-24 $100,000
- Mr. Crabapple wants to donate money now for an account that will allow a favored charity to make $17,000 withdrawals at the end of each of years 19 to 44. How much should he contribute today if investment managers Dogwood Associates expect to earn returns averaging 4.3% per year on the charity's foundation account? (This is a 26-year deferred annuity, with $17,000 to be paid out at the end of each of years 19 to 44.) A. $128,584.54 B. $115,644.17 C $263,040.12 D. $123,283.36 E. $156,230.80Dog Care Co. wants to finance a new animal shelter by making eight annual deposits into a fund earning 11% compounded annually. The first four deposits are to be $19,000 each and will be paid at the beginning of the next four years. The last four deposits are to be $27,000 each and will be paid at the beginning of the last four years. The cost of the new animal shelter amounts to:A school is saving to buy a new $12000 printer in 3 years, with the local bank paying 6% annually. How much needs to be deposited each month to have the needed amount? Compare your answer to the piggy bank method of saving.
- A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $20,366.00 per year (all expenses included). Tuition will increase by 5.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 8.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years) The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college. (ASSUME that the money stays invested during college and the professor will make his last deposit in the account when Sam, the OLDEST daughter,…A local firm sponsors a student loan program for the children of employees.No interest is charged until graduation, and then the interest rate is 5%. Maria borrows $9000 per year, and she graduates after 4 years. Since tuition must be paid ahead of time, assume that she borrows the money at the start of each year. If Maria makes five equal annual payments, what is each payment? Use the cash flow from when she started borrowing the money to when it is all paid back, and then calculate the internal rate of return for Maria’s loan. Is this arrangement attractive to Maria?A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $21,413.00 per year (all expenses included). Tuition will increase by 4.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 8.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years) The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college.
- A business man must fund an account for him to pay the maintenance of the building after it shut down in 10 years. The costs until the business shutdown is part of the operating cost of the business while the maintenance costs starts in 10 years at 23,000 annually. Draw the cash flow diagram and solve on how much money should be deposited if the fund earns an interest of 12 percent?Annabelle, a busy professional, is seeking a way to invest a fixed amount of her monthly salary into an actively-managed investment fund. She has indicated she has a surplus $500 per month to invest. Which investor service would be suitable for her? A.Automatic investment plan of $500 per month B.Automatic withdrawal plan of $500 per month C.$500 conversion privilege D.Regular withdrawal plan of $500 per monthAlex has set up a sinking fund for his son's college education in 10 years. From now on, he can save from his part-time job and deposit $3,000 at the beginning of each year in an account that pays 7.2% compounded annually. What is the balance of the account after 10 years of saving? After 10 years, his son reccived a full scholarship. Alex wishes to invest all his money in a project expected to generate annual cash flows of $10,000 for a period of 5 ycars. What is the NPV of the project if the discount rate is 8%?
