TVM

For each problem use the appropriate Excel formula to calculate a value, rate, or time frame. Then build the cash growth/discount model or amortization table to prove that the number is right.

1. Use the =PMT formula: You are purchasing a house for $343,000 on a 30 year mortgage at 4.1% interest per year with monthly payments and a down payment of 20% of the principal.
2. Investing $5,100 each year, how long until you have $500,000 if you receive an interest rate of 7.5%?
3. You have won the lottery and you have two choices either take $344 million now or an annuity of $18 million each year for the next 30 years at a discount rate of 5%. At what assumed interest rate would the two sets of cash flows be equal in present value?
4. You have an apartment building that makes you $68,000 per year and you expect that profit to grow at 8% over the next ten years. Would you trade it for another business that makes $49,000 dollars currently, but will grow at 16% over the same period? Your opportunity cost of capital is 5.21%. At what cost of capital does it switch from one project to the other?