QUESTIONS AND PROBLEMSSelect problems are available in McGraw$-$Hill Connect. Please see the pack$-$aging options section of the preface for more information.BASIC $($Questions $128)$LO $11.$ Present Value and Multiple Cash Flows. Eulis Co$.$ has identified aninvestment project with the following cash flows. If the discount rate is $10$percent, what is the present value of these cash flows? What is the presentvalue at $18$ percent? At $24$ percent?C H A P T E R $5$ Discounted Cash Flow Valuation $155$Year Cash Flow$1$ $ $6802490397541,160$LO $12.$ LO $13.$ Present Value and Multiple Cash Flows. Investment X offers to pay you$$3,400$ per year for nine years, whereas Investment Y offers to pay you$$5,200$ per year for five years. Which of these cash flow streams has thehigher present value if the discount rate is $6$ percent? If the discount rate is$22$ percent?Future Value and Multiple Cash Flows. Booker, Inc., has identified aninvestment project with the following cash flows. If the discount rate is$8$ percent, what is the future value of these cash flows in Year $4?$ What isthe future value at an interest rate of $11$ percent? At $24$ percent?Year Cash Flow$1$ $ $98521,16031,32541,495$LO $14.$ Calculating Annuity Present Values. An investment offers $$5,450$ per yearfor $15$ years, with the first payment occurring one year from now. If therequired return is $8$ percent, what is the value of the investment? Whatwould the value be if the payments occurred for $40$ years? For $75$ years?Forever?LO $15.$ Calculating Annuity Cash Flows. For each of the following annuities,calculate the annual cash flow.Present Value Years Interest Rate$ $24,500611\%19,70087136,400158285,650206$LO $16.$ Calculating Annuity Values. For each of the following annuities, calculatethe present value.Annuity Payment Years Interest Rate$ $2,10075\%1,09591011,00018830,0002814156$ P A R T $3$ Valuation of Future Cash FlowsLO $17.$ Calculating Annuity Cash Flows. For each of the following annuities,calculate the annual cash flow.Future Value Years Interest Rate$ $30,00085\%1,200,000407625,000258125,000134$LO $18.$ Calculating Annuity Values. For each of the following annuities, calculatethe future value.Annual Payment Years Interest Rate$$1,900108\%6,0004092,950966,4003010$LO $19.$ Calculating Annuity Values. If you deposit $$5,000$ at the end of each yearfor the next $20$ years into an account paying $9\mathrm{.}6$ percent interest, how muchmoney will you have in the account in $20$ years? How much will you have ifyou make deposits for $40$ years?LO $110.$ Calculating Perpetuity Values. Curlys Life Insurance Co$.$ is trying to sellyou an investment policy that will pay you and your heirs $$30,000$ per yearforever. If the required return on this investment is $6$ percent, how much willyou pay for the policy?LO $111.$ Calculating Perpetuity Values. In the previous problem, suppose Curlystold you the policy costs $$645,000.$ At what interest rate would this be a fairdeal?LO $412.$ Calculating EAR. Find the EAR in each of the following cases:Stated Rate $($APR$)$ Number of Times Compounded Effective Rate $($EAR$)10\%$ Quarterly$17$ Monthly$13$ Daily$9$ SemiannuallyLO $413.$ Calculating APR. cases:Find the APR, or stated rate, in each of the followingStated Rate $($APR$)$ Number of Times Compounded Effective Rate $($EAR$)$Semiannually $14\%$Monthly $9$Weekly $8$Daily $13$C H A P T E R $5$ Discounted Cash Flow Valuation $157$LO $4$ LO $4$ LO $4$ LO $4$ LO $4$ LO $2$ LO $214.$ Calculating EAR. First National Bank charges $10\mathrm{.}1$ percent compoundedmonthly on its business loans. First United Bank charges $10\mathrm{.}3$ percentcompounded semiannually. As a potential borrower, which bank would yougo to for a new loan?$15.$ Calculating APR. Vandermark Credit Corp. wants to earn an effectiveannual return on its consumer loans of $14\mathrm{.}2$ percent per year. The bank usesdaily compounding on its loans. What interest rate is the bank required bylaw to report to potential borrowers? Explain why this rate is misleading toan uninformed borrower$\mathrm{.}16.$ Calculating Future Values. What is the future value of $$1,345$ in $16$ yearsassuming an interest rate of $8\mathrm{.}4$ percent compounded semiannually?LO $417.$ Calculating Future Values. Bucher Credit Bank is offering $4\mathrm{.}7$ percentcompounded daily on its savings accounts. If you deposit $$3,650$ today, howmuch will you have in the account in five years? In $10$ years? In $20$ years?$18.$ Calculating Present Values. An investment will pay you $$65,000$ innine years. If the appropriate discount rate is $5\mathrm{.}5$ percent compounded daily,what is the present value?$19.$ EAR versus APR. Ricky Ripovs Pawn Shop charges an interest rate of$13\mathrm{.}7$ percent per month on loans to its customers. Like all lenders, Rickymust report an APR to consumers. What rate should the shop report? Whatis the effective annual rate?$20.$ Calculating Loan Payments. You want to buy a new sports coupe for$$73,400,$ and the finance office at the dealership has quoted you a loan withan APR of $5\mathrm{.}1$ percent for $60$ months to buy the car. What will your monthlypayments be$?$ What is the effective annual rate on this loan?$21.$ Calculating Number of Periods. One of your customers is delinquent onhis accounts payable balance. Youve mutually agreed to a repaymentschedule of $$400$ per month. You will charge $1\mathrm{.}4$ percent per month intereston the overdue balance. If the current balance is $$14,480,$ how long will ittake for the account to be paid off?$22.$ Calculating EAR. Friendlys Quick Loans, Inc., offers you Five for four,or I knock on your door. This means you get $$4$ today and repay $$5$ whenyou get your paycheck in one week $($or else$).$ Whats the effective annualreturn Friendlys earns on this lending business? If you were brave enoughto ask, what APR would Friendlys say you were paying?$23.$ Valuing Perpetuities. Maybepay Life Insurance Co$.$ is selling a perpetualannuity contract that pays $$3,300$ monthly. The contract currently sells for$$425,000.$ What is the monthly return on this investment vehicle? What isthe APR? The effective annual return?$24.$ Calculating Annuity Future Values. You are to make monthly deposits of$$500$ into a retirement account that pays an APR of $9\mathrm{.}8$ percent compoundedmonthly. If your first deposit will be made one month from now, how largewill your retirement account be in $35$ years?$25.$ Calculating Annuity Future Values. In the previous problem, suppose youmake $$6,000$ annual deposits into the same retirement account. How largewill your account balance be in $35$ years?LO $4$ LO $1$ LO $1$ LO $1158$ P A R T $3$ Valuation of Future Cash FlowsLO $1$ LO $126.$ Calculating Annuity Present Values. Beginning three months from now,you want to be able to withdraw $$2,500$ each quarter from your bankaccount to cover college expenses over the next four years. If the accountpays $\mathrm{.}38$ percent interest per quarter, how much do you need to have in yourbank account today to meet your expense needs over the next four years?$27.$ Discounted Cash Flow Analysis. If the appropriate discount rate for thefollowing cash flows is $6\mathrm{.}75$ percent, what is the present value of the cashflows?Year Cash Flow$1$ $$1,20021,10038004600$LO $128.$ Discounted Cash Flow Analysis. If the appropriate discount rate for thefollowing cash flows is $7\mathrm{.}13$ percent per year, what is the present value ofthe cash flows?Year Cash Flow$1$ $$1,40021,90033,40044,300$