11. Present values (2.1) What is the PV of $100 received in: a. Year 10 (at...

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11. Present values (2.1) What is the PV of $100 received in: a. Year 10 (at a discount rate of 1%)? b. C. Year 10 (at a discount rate of 13%)? Year 15 (at a discount rate of 25%)? d. Each of years 1 through 3 (at a discount rate of 12%)? 12. Present values (S2.1) Lofting Snodbury is considering investing in a new boring machine. It costs $380,000 and is expected to produce the following cash flows: Year 1 2 3 4 5 6 7 8 9 10 Cash flow ($000s) 50 57 75 80 85 92 92 80 68 50 If the cost of capital is 12%, what is the machine's NPV? 13. Present values (S2.1) A factory costs. $800,000. You estimate that it will produce. an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what is the net present value of the factory? What will the factory be worth at the end of five years? 15. Present values and opportunity cost of capital (S2.1) Halcyon Lines is considering the purchase of a new bulk carrier for $8 million. The forecasted revenues are $5 million a year and operating costs are $4 million. A major refit costing $2 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $1.5 million. a. What is the NPV if the opportunity cost of capital is 8%? b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. How does this opportunity affect affect your borrowing opportunity calculation of NPV? 19. 20. 21. Discount factors and annuity factors (S2.2) a. If the one-year discount factor is 0.905, what is the one-year interest rate? b. If the two-year interest rate is 10.5%, what is the two-year discount factor? c. Given these one- and two-year discount factors, calculate the two-year annuity factor. d. If the PV of $10 a year for three years is $24.65, what is the three-year annuity factor? e. From your answers to parts (c) and (d), calculate the three-year discount factor. Annuities (S2.2) David and Helen Zhang are saving to buy a boat at the end of five years. If the boat costs $20,000 and they can earn 10% a year on their savings, how much do they need to put aside at the end of years 1 through 5? Annuities (S2.2) Siegfried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 8%, what income can Mr. Basset expect to receive each year? 11. Present values (2.1) What is the PV of $100 received in: a. Year 10 (at a discount rate of 1%)? b. C. Year 10 (at a discount rate of 13%)? Year 15 (at a discount rate of 25%)? d. Each of years 1 through 3 (at a discount rate of 12%)? 12. Present values (S2.1) Lofting Snodbury is considering investing in a new boring machine. It costs $380,000 and is expected to produce the following cash flows: Year 1 2 3 4 5 6 7 8 9 10 Cash flow ($000s) 50 57 75 80 85 92 92 80 68 50 If the cost of capital is 12%, what is the machine's NPV? 13. Present values (S2.1) A factory costs. $800,000. You estimate that it will produce. an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what is the net present value of the factory? What will the factory be worth at the end of five years? 15. Present values and opportunity cost of capital (S2.1) Halcyon Lines is considering the purchase of a new bulk carrier for $8 million. The forecasted revenues are $5 million a year and operating costs are $4 million. A major refit costing $2 million will be required after both the fifth and tenth years. After 15 years, the ship is expected to be sold for scrap at $1.5 million. a. What is the NPV if the opportunity cost of capital is 8%? b. Halcyon could finance the ship by borrowing the entire investment at an interest rate of 4.5%. How does this opportunity affect affect your borrowing opportunity calculation of NPV? 19. 20. 21. Discount factors and annuity factors (S2.2) a. If the one-year discount factor is 0.905, what is the one-year interest rate? b. If the two-year interest rate is 10.5%, what is the two-year discount factor? c. Given these one- and two-year discount factors, calculate the two-year annuity factor. d. If the PV of $10 a year for three years is $24.65, what is the three-year annuity factor? e. From your answers to parts (c) and (d), calculate the three-year discount factor. Annuities (S2.2) David and Helen Zhang are saving to buy a boat at the end of five years. If the boat costs $20,000 and they can earn 10% a year on their savings, how much do they need to put aside at the end of years 1 through 5? Annuities (S2.2) Siegfried Basset is 65 years of age and has a life expectancy of 12 more years. He wishes to invest $20,000 in an annuity that will make a level payment at the end of each year until his death. If the interest rate is 8%, what income can Mr. Basset expect to receive each year?