1. $10,000 deposited in the bank on January 1 at 7% interest compounded annually. You will keep this money in the bank for 5 years. Please set up the calculation for Future Value of this deposit.
2. Assuming the interest rate is 7% and the period is 10 years (instead of 5), what is the table factor & how does it compare to 7% for 5 years? What do we learn from this?
3. Now, assuming the interest rate is 8% and the period is 5 years, what is the table factor and how does it compare to 5 years at 7%? What do we learn from this?
4. Pg. 23 of Section 5 gives you data for evaluating various capital budgeting techniques. This problem is a great guide to use for the calculations below. Please calculate (and identify which project to proceed with) the following:
a. Payback
b. ARR
c. NPV (use interest rate of 10%)
d. BCR
Please use the data in the table below:
|
|
Year
|
Project C
|
Project D
|
|
Investment Outflow
|
0
|
(200)
|
(400)
|
|
Cash Inflows
|
1
|
50
|
150
|
|
|
2
|
85
|
200
|
|
|
3
|
100
|
150
|