Solved Questions Assigned to Class From Chapter 1

8/11/2019 Solved Questions Assigned to Class From Chapter 1

1/16

Discount rate 8%NPV 71.01 #NAME?IRR 10.56% #NAME?

Year Cash flow0 -600

1 1002 1003 1004 1005 1006 1007 1008 100

9 10010 100

Decision: The NPV > 0 and hence you should purchase the asset.Note that the IRR > discount rate, which leads to the same decision.


2/16

Cost 10,000Payment $2,983.16 #NAME?Interest 15%

Year

Principal

at beginningof year

Payment

at end ofyear

Interest Principal

1 10,000.00 2,983.16 1,500.00 1,483.16 #NAME?2 8,516.84 2,983.16 1,277.53 1,705.633 6,811.22 2,983.16 1,021.68 1,961.474 4,849.74 2,983.16 727.46 2,255.695 2,594.05 2,983.16 389.11 2,594.056 0.00

Division of payment between:

#NA

#NAME?


3/16

E?


4/16

12345

678

91011121314151617

18192021

A B C D E F G

Discount rate 15%Initial payment 129.2852NPV -226.52 #NAME? Use Solver (see screen shot belo

Year Cash flow

0 -1000.001 100.00 #NAME?2 110.00 #NAME?

3 121.00 #NAME?4 133.105 146.416 161.057 177.168 194.879 214.3610 235.7911 259.37


5/16

12345

678

91011121314151617

18192021

H I J K L

) to find the answer.


6/16

12345

678

91011121314151617

1819202122

A B C D E F G

Discount rate 20%NPV 76.71

76.71 #NAME?

Year Cash flow 0% -99.33470 -500 4% -29.4699

1 600 8% 17.720832 300 12% 48.387693 300 16% 66.97176

4 200 20% 76.706715 -1,000 24% 79.96436

28% 78.49546IRR1 6.34% #NAME? 32% 73.59927IRR2 60.20% #NAME? 36% 66.24427

40% 57.1548344% 46.87448% 35.80937

Since the NPV > 0 for interest 52% 24.26678

rates between 6.34% and 60.20%, 56% 12.47534you wouldinvest in the project 60% 0.606037if the discount rate is 20%. 64% -11.2143

68% -22.892572% -34.361

Data table

-15

-10

-5

5

10


7/16


8/16

1

2

3456789

101112

A B C D E F G H

IRR? 10.00%

LOAN TABLE

YearCash

flowYear

Principal

at beginning

of year

Payment

at end of

year

Interest Principal

0 -800 1 800.00 300.00 80.00 220.001 300 2 580.00 200.00 58.00 142.002 200 3 438.00 150.00 43.80 106.203 150 4 331.80 122.00 33.18 88.824 122 5 242.98 133.00 24.30 108.705 133 6 134.28


9/16

1

2

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10111213

A B C D E F G H I

IRR? 3.00%

LOAN TABLE

YearCash

flowYear

Principal

at beginning

of year

Payment

at end of

year

Interest Principal

0 -800 1 800.00 300.00 24.00 276.001 300 2 524.00 200.00 15.72 184.282 200 3 339.72 150.00 10.19 139.813 150 4 199.91 122.00 6.00 116.004 122 5 83.91 133.00 2.52 130.485 133 6 -46.57


10/16

1

2

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10111213

J K L M N


11/16

Loan principal 100,000Term (years) 5Interest 13%

Annual payment $28,431.45 #NAME?


12/16

Loan principal 15,000Interest rate annual 15%

monthly 1.25% #NAME?Loan term (months) 48

Monthly payment $417.46 #NAME?

Month

Principal at

beginning of

month

Payment Interest Principal

1 15,000.00 417.46 187.50 229.962 14,770.04 417.46 184.63 232.843 14,537.20 417.46 181.72 235.754 14,301.46 417.46 178.77 238.695 14,062.76 417.46 175.78 241.68

6 13,821.09 417.46 172.76 244.707 13,576.39 417.46 169.70 247.768 13,328.63 417.46 166.61 250.859 13,077.78 417.46 163.47 253.9910 12,823.79 417.46 160.30 257.1611 12,566.63 417.46 157.08 260.3812 12,306.25 417.46 153.83 263.6313 12,042.62 417.46 150.53 266.9314 11,775.69 417.46 147.20 270.2715 11,505.42 417.46 143.82 273.64

16 11,231.78 417.46 140.40 277.0617 10,954.71 417.46 136.93 280.53

18 10,674.19 417.46 133.43 284.0319 10,390.15 417.46 129.88 287.5820 10,102.57 417.46 126.28 291.1821 9,811.39 417.46 122.64 294.8222 9,516.57 417.46 118.96 298.5023 9,218.07 417.46 115.23 302.2424 8,915.83 417.46 111.45 306.0125 8,609.82 417.46 107.62 309.8426 8,299.98 417.46 103.75 313.7127 7,986.27 417.46 99.83 317.63

28 7,668.64 417.46 95.86 321.6029 7,347.03 417.46 91.84 325.6230 7,021.41 417.46 87.77 329.69

31 6,691.72 417.46 83.65 333.8132 6,357.90 417.46 79.47 337.9933 6,019.91 417.46 75.25 342.2134 5,677.70 417.46 70.97 346.4935 5,331.21 417.46 66.64 350.8236 4,980.39 417.46 62.25 355.21

37 4,625.18 417.46 57.81 359.6538 4,265.54 417.46 53.32 364.1439 3,901.39 417.46 48.77 368.69

Split of payment

between:


13/16

40 3,532.70 417.46 44.16 373.3041 3,159.40 417.46 39.49 377.9742 2,781.43 417.46 34.77 382.69

43 2,398.74 417.46 29.98 387.4844 2,011.26 417.46 25.14 392.3245 1,618.94 417.46 20.24 397.22

46 1,221.71 417.46 15.27 402.1947 819.52 417.46 10.24 407.2248 412.31 417.46 5.15 412.3149 0.00


14/16

PV of

remaining

payments

Same

answer

using PV$15,000.00 #NAME? $15,000.00 #NAME?$14,770.04 #NAME? $14,770.04 #NAME?$14,537.20 #NAME? $14,537.20 #NAME?$14,301.46 $14,301.46$14,062.76 $14,062.76

$13,821.09 $13,821.09$13,576.39 $13,576.39$13,328.63 $13,328.63$13,077.78 $13,077.78$12,823.79 $12,823.79

Part c of question


15/16

1

234

5678910111213

14151617181920212223

242526

27282930313233

A B C D

Cost of car, cash 30,000

Month

Deferred payment plan 0 Cash payment 5,000 1

Monthly payment 1,050 2 Number of months 30 3

4Bank car loan rate (annual) 15% 5Bank car loan rate (monthly) 1.25% 6

79.a. Present value of deferred payment plan 31,133.35 #NAME? 8

9Dealer's monthly IRR 1.56% #NAME? 10

Annualized (in this case, multiplied by 12) 18.73% #NAME? 11121314151617181920

212223

24252627282930


16/16

1

234

5678910111213

14151617181920212223

242526

27282930313233

E F G H

Cash payment

Payment

under

deferred

payment plan

Difference

30,000 5,000 25,000 #NAME?0 1,050 -1,050 #NAME?

0 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,050

0 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,050

0 1,050 -1,0500 1,050 -1,0500 1,050 -1,050

0 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,050

Documents

Solved Questions Assigned to Class From Chapter 1