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Question;58. The Wine Press is considering a project which has;an initial cash requirement of $187,400. The project will yield cash flows of;$2,832 monthly for 84 months. What is the rate of return on this project?;A. 6.97 percent;B. 7.04 percent;C. 7.28 percent;D. 7.41 percent;E. 7.56 percent;59. Your insurance agent is trying to sell you an;annuity that costs $200,000 today. By buying this annuity, your agent promises;that you will receive payments of $1,225 a month for the next 30 years. What is;the rate of return on this investment?;A. 5.75 percent;B. 5.97 percent;C. 6.20 percent;D. 6.45 percent;E. 6.67 percent;60. You have been investing $250 a month for the last;13 years. Today, your investment account is worth $73,262. What is your average;rate of return on your investments?;A. 8.94 percent;B. 9.23 percent;C. 9.36 percent;D. 9.41 percent;E. 9.78 percent;61. Will has been purchasing $25,000 worth of New Tek;stock annually for the past 11 years. His holdings are now worth $598,100. What;is his annual rate of return on this stock?;A. 14.13 percent;B. 14.24 percent;C. 14.29 percent;D. 14.37 percent;E. 14.68 percent;62. Your father helped you start saving $20 a month;beginning on your 5th birthday. He always made you deposit the money into your;savings account on the first day of each month just to "start the month;out right." Today completes your 17th year of saving and you now have;$6,528.91 in this account. What is the rate of return on your savings?;A. 5.15 percent;B. 5.30 percent;C. 5.47 percent;D. 5.98 percent;E. 6.12 percent;63. Today, you turn 23. Your birthday wish is that you;will be a millionaire by your 40th birthday. In an attempt to reach;this goal, you decide to save $50 a day, every day until you turn 40. You open;an investment account and deposit your first $50 today. What rate of return;must you earn to achieve your goal?;A. 10.67 percent;B. 11.85 percent;C. 12.90 percent;D. 13.06 percent;E. 13.54 percent;64. You just settled an insurance claim. The;settlement calls for increasing payments over a 10-year period. The first;payment will be paid one year from now in the amount of $10,000. The following;payments will increase by 4.5 percent annually. What is the value of this;settlement to you today if you can earn 8 percent on your investments?;A. $76,408.28;B. $80,192.76;C. $82,023.05;D. $84,141.14;E. $85,008.16;65. Your grandfather left you an inheritance that will;provide an annual income for the next 10 years. You will receive the first;payment one year from now in the amount of $4,000. Every year after that, the;payment amount will increase by 6 percent. What is your inheritance worth to;you today if you can earn 9.5 percent on your investments?;A. $31,699.15;B. $36,666.67;C. $41,121.21;D. $43,464.12;E. $46,908.17;66. You just won a national sweepstakes! For your;prize, you opted to receive never-ending payments. The first payment will be;$12,500 and will be paid one year from today. Every year thereafter, the;payments will increase by 3.5 percent annually. What is the present value of;your prize at a discount rate of 8 percent?;A. $166,666.67;B. $248,409.19;C. $277,777.78;D. $291,006.12;E. $300,000.00;67. A wealthy benefactor just donated some money to;the local college. This gift was established to provide scholarships for worthy;students. The first scholarships will be granted one year from now for a total;of $35,000. Annually thereafter, the scholarship amount will be increased by;5.5 percent to help offset the effects of inflation. The scholarship fund will;last indefinitely. What is the value of this gift today at a discount rate of 8;percent?;A. $437,500;B. $750,000;C. $1,200,000;D. $1,400,000;E. $1,450,750;68. Southern Tours is considering acquiring Holiday;Vacations. Management believes Holiday Vacations can generate cash flows of;$187,000, $220,000, and $245,000 over the next three years, respectively. After;that time, they feel the business will be worthless. Southern Tours has;determined that a 13.5 percent rate of return is applicable to this potential;acquisition. What is Southern Tours willing to pay today to acquire Holiday;Vacations?;A. $503,098;B. $538,615;C. $545,920;D. $601,226;E. $638,407;69. You are considering two savings options. Both;options offer a 7.4 percent rate of return. The first option is to save $900;$2,100, and $3,000 at the end of each year for the next three years;respectively. The other option is to save one lump sum amount today. If you;want to have the same balance in your savings account at the end of the three;years, regardless of the savings method you select, how much do you need to;save today if you select the lump sum option?;A. $4,410;B. $4,530;C. $4,600;D. $5,080;E. $5,260;70. Your parents have made you two offers. The first;offer includes annual gifts of $10,000, $11,000, and $12,000 at the end of each;of the next three years, respectively. The other offer is the payment of one;lump sum amount today. You are trying to decide which offer to accept given the;fact that your discount rate is 8 percent. What is the minimum amount that you;will accept today if you are to select the lump sum offer?;A. $28,216;B. $29,407;C. $29,367;D. $30,439;E. $30,691;71. You are considering changing jobs. Your goal is to;work for three years and then return to school full-time in pursuit of an;advanced degree. A potential employer just offered you an annual salary of;$41,000, $44,000, and $46,000 a year for the next three years, respectively.;All salary payments are made as lump sum payments at the end of each year. The;offer also includes a starting bonus of $2,500 payable immediately. What is this;offer worth to you today at a discount rate of 6.75 percent?;A. $112,406;B. $115,545;C. $117,333;D. $121,212;E. $134,697;72. You are considering a project which will provide;annual cash inflows of $4,500, $5,700, and $8,000 at the end of each year for;the next three years, respectively. What is the present value of these cash;flows, given a 9 percent discount rate?;A. $14,877;B. $15,103;C. $15,429;D. $16,388;E. $16,847;73. You just signed a consulting contract that will;pay you $35,000, $52,000, and $80,000 annually at the end of the next three;years, respectively. What is the present value of these cash flows given a 10.5;percent discount rate?;A. $133,554;B. $142,307;C. $148,880;D. $151,131;E. $156,910;74. You have some property for sale and have received;two offers. The first offer is for $89,500 today in cash. The second offer is;the payment of $35,000 today and an additional $70,000 two years from today. If;the applicable discount rate is 11.5 percent, which offer should you accept and;why?;A. You should accept the $89,500 today because it has the higher net;present value.;B. You should accept the $89,500 today because it has the lower future;value.;C. You should accept the first offer as it has the greatest value to you.;D. You should accept the second offer because it has the larger net;present value.;E. It does not matter which offer you accept as they are equally valuable.;75. Your local travel agent is advertising an upscale;winter vacation package for travel three years from now to Antarctica. The;package requires that you pay $25,000 today, $30,000 one year from today, and a;final payment of $45,000 on the day you depart three years from today. What is;the cost of this vacation in today's dollars if the discount rate is 9.75 percent?;A. $86,376;B. $89,695;C. $91,219;D. $91,407;E. $93,478;76. One year ago, Deltona Motor Parts deposited;$16,500 in an investment account for the purpose of buying new equipment three;years from today. Today, it is adding another $12,000 to this account. The;company plans on making a final deposit of $20,000 to the account one year from;today. How much will be available when it is ready to buy the equipment;assuming the account pays 5.5 interest?;A. $53,408;B. $53,919;C. $56,211;D. $56,792;E. $58,021;77. Lucas will receive $6,800, $8,700, and $12,500;each year starting at the end of year one. What is the future value of these;cash flows at the end of year five if the interest rate is 7 percent?;A. $32,418;B. $32,907;C. $33,883;D. $35,411;E. $36,255;78. You plan on saving $5,200 this year, nothing next;year, and $7,500 the following year. You will deposit these amounts into your;investment account at the end of each year. What will your investment account;be worth at the end of year three if you can earn 8.5 percent on your;funds?;A. $13,528.12;B. $13,621.57;C. $13,907.11;D. $14,526.50;E. $14,779.40;79. Miley expects to receive the following payments;Year 1 = $60,000, Year 2 = $35,000, Year 3 = $12,000. All of this money will be;saved for her retirement. If she can earn an average of 10.5 percent on her;investments, how much will she have in her account 25 years after making her;first deposit?;A. $972,373;B. $989,457;C. $1,006,311;D. $1,147,509;E. $1,231,776;80. Blackwell, Inc. has a $75,000 liability it must;pay three years from today. The company is opening a savings account so that;the entire amount will be available when this debt needs to be paid. The plan;is to make an initial deposit today and then deposit an additional $15,000 each;year for the next three years, starting one year from today. The account pays a;4.5 percent rate of return. How much does the firm need to deposit today?;A. $18,299.95;B. $20,072.91;C. $21,400.33;D. $24,487.78;E. $31,076.56;81. The government has imposed a fine on the Corner;Tavern. The fine calls for annual payments of $150,000, $100,000, $75,000, and;$50,000, respectively, over the next four years. The first payment is due one;year from today. The government plans to invest the funds until the final;payment is collected and then donate the entire amount, including the;investment earnings, to help the local community shelter. The government will;earn 6.25 percent on the funds held. How much will the community shelter;receive four years from today?;A. $349,674.06;B. $366,875.00;C. $422,497.56;D. $458,572.71;E. $515,737.67;82. Wicker Imports established a trust fund that;provides $90,000 in scholarships each year for needy students. The trust fund;earns a fixed 6 percent rate of return. How much money did the firm contribute;to the fund assuming that only the interest income is distributed?;A. $1,150,000;B. $1,200,000;C. $1,333,333;D. $1,500,000;E. $1,600,000;83. A preferred stock pays an annual dividend of;$2.60. What is one share of this stock worth today if the rate of return is;11.75 percent?;A. $18.48;B. $20.00;C. $22.13;D. $28.80;E. $30.55;84. You would like to establish a trust fund that will;provide $120,000 a year forever for your heirs. The trust fund is going to be;invested very conservatively so the expected rate of return is only 5.75;percent. How much money must you deposit today to fund this gift for your;heirs?;A. $2,086,957;B. $2,121,212;C. $2,300,000;D. $2,458,122;E. $2,500,000;85. You just paid $750,000 for an annuity that will;pay you and your heirs $45,000 a year forever. What rate of return are you;earning on this policy?;A. 5.25 percent;B. 5.50 percent;C. 5.75 percent;D. 6.00 percent;E. 6.25 percent


Paper#50988 | Written in 18-Jul-2015

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