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For all problems involving computation

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For all problems involving computation, you must show your work to receive any credit.;Two points will be deducted for arithmetic errors, if all other components of your answer;are correct.;1. (10 pts.);Find the future value of $500, invested at 6% annual interest, compounded monthly;for three years?;2. (15 pts.);Find the present value of $374, paid exactly nine years from now, if the required rate;of return is 9%.;3. (15 pts.);Youre saving for your daughters college expenses. Shes now seven years of age;and you assume shell start college at age eighteen. You figure that the total for four;years of college will be $150,000. If you can earn 2% interest on a college savings;account, how much will you need to put in the account now to have $150,000 when;your daughter starts college?;4. (15 pts.);If the present discounted value of $139 received a year from today is $125, what is;the discount rate?;5. (20 pts.);A factory costs $800,000. You reckon that it will produce an inflow after operating;costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what;is the net present value (NPV) of the factory?;6. (25 pts.);After graduation from Harvard Extension, you decide to stay in the Cambridge area;and start your own business. You think you see a couple of opportunities.;Knowing first-hand the pressure Harvard students are under, you consider opening a;business that allows them to let off steam and get rid of their aggression: A paintball;center right in The Square.;The cost of the project would be $150,000, payable up front, while revenues are;expected to be $7,500 per year, forever.;a. (5 pts.);If the interest rate on comparable assets is 4%, is this project worthwhile? Show;your calculations.;b. (10 pts.);What is the projects internal rate of return (IRR)? Show your calculations.;You are also considering a second business opportunity: Supplying fish, fresh from;the bottom of the Charles River, to Harvard Dining Services, for the next three years;in return for an up-front payment from them of $15,000. You figure it will cost you;$5,000 a year in supplies to provide this culinary joy.;So, the revenue and costs of the project can be summarized as follows;Immediate and only revenue;Costs in Year 1;Costs in Year 2;Costs in Year 3;$15,000;$ 5,000;$ 5,000;$ 5,000;c. (10 pts.);Find this projects internal rate of return (IRR). Show your calculations.

 

Paper#17363 | Written in 18-Jul-2015

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