Use the information below to answer question #21:

The owner of the Krusty Krab is considering selling his restaurant and retiring. An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement. The owner is considering the following three alternatives:

a. Sell the restaurant now and retire.

b. Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend $50,000 now, but will generate $100,000 in profit next year. In one year the owner will sell the restaurant.

c. Scale back the restaurant's hours and ease into retirement over the next year. This will require the owner to spend $40,000 on expenses now, but will generate $75,000 in profit at the end of the year. In one year the owner will sell the restaurant.

21. If the interest rate is 7%, the NPV of alternative #1 is closest to:

a. $357,000

b. $350,000

c. $375,500

d. $400,000

Nielson Motors is considering an opportunity that requires an investment of $1,000,000 today and will provide $250,000 one year from now, $450,000 two years from now, and $650,000 three years from now.

22. If the appropriate interest rate is 10%, then the NPV of this opportunity is closest to:

a. $300,000

b. ($88,000)

c. $88,000

d. $1,300,000

23. You are interested in purchasing a new automobile that costs $35,000. The dealership offers you a special financing rate of 6% APR (0.5%) per month for 48 months. Assuming that you do not make a down payment on the auto and you take the dealer's financing deal, then your monthly car payments would be closest to:

a. $647

b. $729

c. $842

d. $822

Use the following information to answer the question below.

Your great aunt Matilda put some money in an account for you on the day you were born. This account pays 8% interest per year. On your 21st birthday the account balance was $5,033.83.

24. The amount of money that would be in the account if you left the money there until your 65th birthday is closest to:

a. $168,824

b. $29,556

c. $148,780

d. $748,932

25. Consider the following timeline detailing a stream of cash flows:

If the current market rate of interest is 8%, then the present value of this stream of cash flows is closest to:

a. $21,211

b. $24,074

c. $22,871

d. $26,000