Problem 8) Find the present value (PV), rounded to the nearest cent, of $4,500 you expect to receive exactly eight years from today, assuming a discount (or interest) rate of 4% per year.

Problem 10. A) Prescott Corporation is considering investing in a project which requires an outlay of $10 million in cash at the start, but is expected to generate revenues of $3 million at the end of one year, $4 million at the end of two years, and $5 million at the end of three years. The project will then be terminated, with no further revenues or costs.

There are no further costs after the initial outlay of $10 million.

Should this project be undertaken if the opportunity cost of Prescotts capital is 10%? Why or why not?

Show all calculations you used to arrive at your answer.

I have answer for 10 a) but ( I will post you answer for your convenice) 10 b) ?? I only need answer for (10 B)

Problem 10 a) answer

Your Answer: cost up front: $10 million

1st year: $3 millon

2nd year: $4 million

3rd year: $5 million

i= 10%

PV of cash outflow: $10 million

PV of cash inflow: $9.7897 million

(3/(1+0.1)^1 + 4/(1+0.1)^2 +5/(1+0.1)^3= 2.7273+3.3058+3.7566=9.7897 million)

NPV= PV of cash inflow- PV of cash outflow

$9.7897 million-$10 million= $-210,300

The project should not be overtaken because the net present value is negative $-210,300 which means the present value of the future incomes are lower than the present value.

problem 10 B) queison ???? ( i need answer for 10 b)

Using the numbers given in part (a) for revenues and costs, set up an equation you would use to find the projects internal rate of return (IRR).

Note: You do not need to solve the equation; just set it up.

Consider the following balance sheet for the First National Bank (M stands for millions of dollars; assume no assets or liabilities except for those listed):

( Problem 2 )

Assets Liabilities

Reserves $ 150M Checking Deposits $ 1,200M

Bonds $ 1,000M Savings Deposits $ 4,000M

Loans $ 6,000M Bank Capital $ ?

Assume that the reserve requirement (R) is 5%.

1 A) is to find Bank Capital

1b. Find E, the proportion of checking deposits that the bank is holding as excess reserves. Show how you arrived at your answer.