Important General Instructions for Reporting Numerical Answers: - Do not round intermediate calculations. - Report numerical answers to 2 decimal places. - Unless otherwise instructed, solve problems in the given units. |E: if given units are in $K, complete your computations in these units and, as applicable, report your answer in these units (without writing |I$|l or IFKII}. - Do not report any numerical answer as a percent. |E: for example, write 0.324 instead of 32.4%. - Report negative numbers with a leading minus sign, like this (for example): -23.451 Not like this: (23.451). - Note that Canvas removes trailing insignificant figures. If you type, for example, 41.350, Canvas will remove the last decimal place and record your answer as 41.35 This is fine because 41.35 = 41.350. - Assume time is measured in years unless otherwise stated. Question 1 1 pts Note: Some given numbers may change with each attempt. McCann Co. has identified an investment project with the following cash flows. Year Cash Flow 1 $ 530 2 690 3 875 4 1,090 If the discount rate (r) is 10 percent, what is the present value of these cash flows? Question 2 1 pts Note: The PV and r for this problem changes with every attempt Investment X offers to pay you $CF per year for eight years, starting one year from now, in return for your investment today (PV or CFo) of $35,788. What is $CF if the interest rate for this project (r) is 7%? Question 3 1 pts Velocity Investors offers a 6% annuity (r = 6%) paying $4,350 per year for 15 years, starting one year from now. If you have just $43,000 available today to purchase this annuity contract, can you afford it? Choose yes or no and provide one reason for your choice. Yes No Because t Because t Because t Because t Because t Because t he asking price of the annuity is less than the amount you have available. he uniform annuity payments are too large. he asking price of the annuity is more than the amount you have available. he uniform annuity payments are too small. he interest rate is not consistent with the asking price. he interest rate is not consistent with the uniform payments. Question 4 1 pts An investment project offers $4,350 per year forever, with the first payment occurring one year from now. If the interest rate is 6%, what would you pay to participate in this project? Hint: this is a perpetuity problem (key word "forever"). Use the perpetuity formula PV = CF/r Refer to pages 58 and 59 of the CHO8b class notes if needed. Question 5 1 pts If you put up $41,000 today in exchange for a 5.1 percent, 15-year financial annuity, what will your annual annuity payments be? Question 6 1 pts Your company will generate $47,000 in annual revenue each year for the next seven years from a new information database. Each blob of $47,000 arrives at EQY. If the appropriate interest rate is 7.1 percent, what is the present value of the revenue? Question 7 1 pts Note: Some numbers for this problem change with every attempt The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $4,000 per year forever. If you require a return on this investment of 7%, how much will you pay for the policy? Hint: this is a perpetuity problem (key word "forever"). Use the perpetuity formula PV = CF/r. Refer to pages 58 and 59 of the CHO8b class notes if needed. Question 8 1 pts Medical Lessors, Inc (MLI) buys an x-ray machine for $200K. On the same day (EOY 0), the firm leases the machine to Radiology, Inc. (RI) for six years, via a six-year, uniform-payment, annuity-due contract with 10% interest. Payments are made annually. Is this a correct Cash Flow Diagram for MLI? ("Correct" does not require the numerical value of cash flows shown as "CF"). . .. CF ....... CF..... CF. CF -.$200K . O No O YesQuestion 9 1 pts Medical Lessors, Inc (MLI) buys an x-ray machine for $200K. On the same day (EOY 0), the firm leases the machine to Radiology, Inc. (RI) for six years, via a six-year, uniform-payment, annuity-due contract with 10% interest. Payments are made annually. What is the amount of the uniform payment? | Question 10 3 pts Note: CF1 will change with each submission, so you will need to recompute your answer each time you resubmit. The present value of the following cash flow stream is $7,500 when discounted at 9 percent annually. What is the value of the missing cash flow? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Hint: Write the "CFo =, or PVtot = " equation for this, including "X" for the unknown Cash Flow. Then solve for X. 1E: Write out the complete version of this equation, including all the numercial values you can. 7,500 = CF1/(1+9%) + X/(1+9%)"2 +... Time (years) Cash Flow 1 1,438 2 3.2 2450 4 2,980 Q Search Question 11 1 pts Suppose you purchase a 5-year, 6.8% annuity with annual payouts of $13,500. How much do you pay for this contract? Question 12 1 pts Suppose you are going to receive five annual payments of $13,500. The appropriate interest rate is 6.8 percent. What is the present value if the payments are an annuity due? Question 13 1 pts An investment offers $4,350 per year for forever, with the first payment occurring one year from now. What is the best way to describe this investment? O A perpetual annuity due O A growing perpetuity O An annuity due O A perpetuity O A perpetual sovereign bond O An annuity O A growing annuity O A growing annuity due Question 14 1 pts A project has these cash flows PVtot 1,000 CF1 500 at T = 1 year CF2 600 at T = 3 years Write an algebraic equation to use as a start-point for finding the r of this project. O 1,000 = 500/(1+r) + 600/(1+r)^3 O 0 = 1,000 + (500 + 600) / (1+r)^3 O 1,000 = 500/(1+r) + 600/(1+r)^2 O 1,000 = (500 + 600) / (1+r)^3 O 1,000 = (500 + 600) / (1+r)^2Question 15 1 pts You believe that Walmart will pay a dividend of $200/share in a year, and you think that the firm will increase its annual dividend payment by 1% forever. What is the PV of all the dividends/share that the firm will distribute if r = 6%? Hint: This is a growing perpetuity problem. Use the growing perpetuity formula: PV = C1/(r-g). Here C1 =200 and g = 1%. Refer to pages 61 and 62 of the CHO8b class notes if needed. Question 16 Consider a project with these CFs: Time CF 0 10,000 (PVtot or CFo) 1 1,000 2.5 11,000 Which is closest to the interest rate (discount rate) of this project? Hint: Write the complete fundamental discounting equation for this problem ("PVtot =" or "CFo ="), putting in numbers for everything but r. Then substitute in the given values of r. The r that makes the equation an equality is the correctr. O 10% O 6% O 8% O 12%