Assignment - Time Value of Money
Q1. Growth Enterprises, Inc. has $40 million that it can invest in any of the four investments, which has cash flows as shown below:
|
End of Year
|
A
|
B
|
C
|
D
|
|
1
|
3000
|
|
3000
|
|
|
2
|
3000
|
15000
|
|
|
|
3
|
3000
|
17000
|
|
|
|
4
|
3000
|
|
10000
|
|
|
5
|
3000
|
|
|
|
|
6
|
3000
|
|
|
20000
|
|
7
|
3000
|
|
|
|
|
8
|
3000
|
|
5000
|
|
Because Growth Enterprises has enough funds for only one investment, its consultant has proposed the third alternative to be, according to its expertise, the best in town. However, Growth Enterprises questions its consultant and wants to eliminate the present value of each investment. Assuming alternatively a 10% discount rate and a 15% discount rate, what is Growth Enterprises' best alternative?
2. Stanford Simmons, who recently sold his Porsche, placed $15,000 in saving account paying annual compounded interest rate of 5%.
a. Calculate the amount of money that will have accrued if he leaves the money in the bank for 1, 5, 8 and 15 years.
b. If he moves his money into an account that pays 8% or one that pays 10%, rework part (a) using these new interest rates.
c. What conclusions can you draw about the relationship between interest rates, time, and future sums from the calculations you have completed in this problem?
The answers should be in excel sheet with all fourmuals.