1. Batesville Manufacturing is considering a capital investment that will provide cash flows of $1,000 a year for 20 years. What would be the present value of benefits if all cash flows occurred at mid-year? What would be the present value of benefits if all cash flows occurred at the beginning of the year?
2. You are considering the purchase of a rental property for $200,000, with a $50,000 down payment. Cash flows will be $4,000 every year for 15 years. The loan balance will be $100,000 at the end of 15 years. For what price must you sell the property at the end of 15 years to provide an effective annual return of 8 percent on your equity investment? (Assume year-end cash flows)
For problems #1 and #2, please show your work, please identify the PV, FV, i, n, PMT if there is any and please show the formulas that were used for both problems. Problem #1 has two questions. The more work you show and the more descriptive and detailed you are in the work shown, it will really help me understand where I went wrong.
Also, for question #1, the interest rate or i is 12%