2. Present Value of a Single Sum a. Springfield wishes to match a state investment in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
2. Present Value of a Single Sum a. Springfield wishes to match a state investment in a solar farm in four years. In order to accomplish this, Springfield must have $3,000,000 to invest at that time. How much must Springfield invest today at 4.25% in order to meet that goal? b. Your company estimates that it will need to replace its warehouse software in three years, at a cost of S225,000. Your CEO asks how much the company should invest now at an annual interest rate of 5.25% in order to have that amount available in three years. Provide her with an answer. c. A baseball team has written a $10,000,000 performance bonus into a key player's contract. The player will receive the bonus if he hits 150 home runs over the next five years. The team believes the player will meet this target. The team can invest funds at 4.40%. How much should the team invest today in order to have the amount available to pay the bonus in five years. In other words, assuming the player will hit the requisite number of home runs, what is the present value of the commitment the team has made? 3. Solving for interest rate or number of periods a. A local museum wishes to invest $125,000 of endowed funds for 8 years, with a goal of having $200,000 at the end of that time. At what interest rate, compounded annually, would the museum need to invest the funds to achieve this goal? b. Assume the museum in part a. knows, instead, that it can earn 6.25%, compounded annually, on its endowment of $125,000. How long (in years) will it take the endowment to grow to $200,000? 2. Present Value of a Single Sum a. Springfield wishes to match a state investment in a solar farm in four years. In order to accomplish this, Springfield must have $3,000,000 to invest at that time. How much must Springfield invest today at 4.25% in order to meet that goal? b. Your company estimates that it will need to replace its warehouse software in three years, at a cost of S225,000. Your CEO asks how much the company should invest now at an annual interest rate of 5.25% in order to have that amount available in three years. Provide her with an answer. c. A baseball team has written a $10,000,000 performance bonus into a key player's contract. The player will receive the bonus if he hits 150 home runs over the next five years. The team believes the player will meet this target. The team can invest funds at 4.40%. How much should the team invest today in order to have the amount available to pay the bonus in five years. In other words, assuming the player will hit the requisite number of home runs, what is the present value of the commitment the team has made? 3. Solving for interest rate or number of periods a. A local museum wishes to invest $125,000 of endowed funds for 8 years, with a goal of having $200,000 at the end of that time. At what interest rate, compounded annually, would the museum need to invest the funds to achieve this goal? b. Assume the museum in part a. knows, instead, that it can earn 6.25%, compounded annually, on its endowment of $125,000. How long (in years) will it take the endowment to grow to $200,000?
Expert Answer:
Answer rating: 100% (QA)
2 PV FV1r n PV Present value FV Future value r Rate of interest n Number of periods a FV 300000... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
Posted Date:
Students also viewed these accounting questions
-
How is the present value of a single sum related to the present value of an annuity?
-
If the net present value of a proposed project is negative, then the actual rate of return is what?
-
If an investor wants to earn an annual interest rate of 6.4% on a 26-week T-bill with a maturity value of $5,000, how much should the investor pay for the T-bill?
-
At a large bank, length of service is the best single predictor of employees' salaries. Can we conclude, therefore, that there is a cause-effect relationship between length of service and salary?
-
Refer to the DJIA data in Problem 5- 39. In Problem 5-39, The following table provides the Dow Jones Industrial Average (DJIA) opening index value on the first working day of 19942013: Develop a...
-
a. In your mature years, do you expect to be as wealthy as your parents, or more so? Explain. b. Do you think you deserve to be as wealthy as your parents, or more so, or less so? Explain.
-
Describe and explain the way in which central banks use open market operations, discount lending and changing the bank reserve requirement levels to influence the economy.
-
Profit Lin Corporation has a single product whose selling price is $120 and whose variable expense is $80 per unit. The companys monthly fixed expense is $50,000. Required: 1. Using the equation...
-
Several students were taking a summer course in graphic design. The teacher had given general instructions to the class to get them started on their projects. While the teacher worked with each...
-
Online Security Buddies provides consulting services to small businesses that require computer security but are too small to have their own IT person on staff. The business had the following account...
-
A contract requires lease payments of $900 at the beginning of every month for 8 years. a. What is the present value of the contract if the lease rate is 3.50% compounded annually? Round to the...
-
Remove missing values from your dataset(s) before answering the following questions. 1) Use mobile.csv dataset that classifies mobile phones with respect to their prices into four categories...
-
The following is a transcription of a real conversation with Chat GPT (the artificial intelligence language model that has been in the news lately) that Jerrod had on January 25, 2023. User input:...
-
The following information is available for Forever Fragrance Company's Southern Territory by salesperson: Garcia Jones Total Sales $29,000 $40,000 $69,000 Variable cost of goods sold 3,700 4,800...
-
Two planes take off at the same exact moment. They are flying across the Atlantic. One leaves New York and is flying to Paris at 500 miles per hour. The other leaves Paris and is flying to New York...
-
A company has the demand of 2800 units per year, holding costs of $10 per unit and setup costs (ordering cost) of $30 per order. The demand rate is constant . The order lead time is 1 days, and the...
-
Inventory/Quantity Discount Model Data Enter the data in the shaded area. The minimum quantity is the minimum amount that needs to be ordered in order to get the price that is in the same column....
-
What is an insurable interest? Why is it important?
-
Why is the remaining time to maturity an important factor in evaluating the impact of a change in yield to maturity on bond prices?
-
The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $120,000. Of this amount, $70,000 is subject...
-
Surgical Supplies Corporation paid a dividend of $1.12 per share over the last 12 months. The dividend is expected to grow at a rate of 25 percent over the next three years (supernormal growth). It...
-
Classify each of the following costs relative to the cost object Apple iPad: Assembly labor iPad case CEO salary Microprocessor. Depreciation on Apple corporate headquarters Health insurance for...
-
Shea Company reported raw material purchases of \($1,400,\) paid \($1,200\) in factory labor, and incurred and applied \($900\) in factory overhead for March. The March 1 inventory balances were...
-
Environmental Business Consultants, LLC (EBC), is a consulting firm that specializes in the areas of recycling and solid waste and water/wastewater management services. The firm has offices located...
Study smarter with the SolutionInn App