Please do not answer using excel 3) What is the future value at the end of year
ID: 1132350 • Letter: P
Question
Please do not answer using excel
3) What is the future value at the end of year 10 of a series of 6 deposits? The first deposit occurs at the end of year 5 and is $700. The remaining deposits increase by $150/year (so the last deposit will be $1,450 and will occur at the end of year 10). Assume i = 10% annual rate compounded annually.
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4) Your business is expected to generate a $60,000 profit at the end of year 1, and profit will increase by 9% per year through year 10. If you can earn 7% annual interest compounded annually, what is the present value of all your profits over the next 10 years?
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5) What is the future value at the end of year 13 of an investment that starts at $6,000 and grows by 7% per year for 13 years ($6,000 is invested at the end of year 1). The interest rate is 10% annual compounded annually.
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6) You anticipate a cash flow of $900 at the end of year 1, $600 at the end of year 2, and $500 at the end of year 4. What is the annual equivalent of the cash flow for years 1 through 4? In other words, what constant value “A” could you receive at the end of years 1-4 such that the two cash series of flows are economically equivalent? The interest rate is 6% annual compounded annually.
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Explanation / Answer
Q3. Year Deposits FVF @ 10% Future Value 5 700 1.61051 1127.357 6 850 1.4641 1244.485 7 1000 1.331 1331 8 1150 1.21 1391.5 9 1300 1.1 1430 10 1450 1 1450 Future Value of deposits 7974.34 Q4. Year Profits PVF @ 7% Present Values 1 60000 0.9346 56074.8 2 65400 0.8734 57122.9 3 71286 0.8163 58190.6 4 77701.7 0.7629 59278.3 5 84694.9 0.7130 60386.3 6 92317.4 0.6663 61515 7 100626 0.6227 62664.8 8 109682 0.5820 63836.1 9 119554 0.5439 65029.3 10 130314 0.5083 66244.8 Present value of profits 610343 Q5. Year Investment FVf @ 10% Future value 1 6000 3.138428 18830.57 2 6420 2.853117 18317.01 3 6869.4 2.593742 17817.45 4 7350.258 2.357948 17331.52 5 7864.776 2.143589 16858.85 6 8415.31 1.948717 16399.06 7 9004.382 1.771561 15951.81 8 9634.689 1.61051 15516.76 9 10309.12 1.4641 15093.58 10 11030.76 1.331 14681.94 11 11802.91 1.21 14281.52 12 12629.11 1.1 13892.02 13 13513.15 1 13513.15 Future value of investment 208485 Q6. Year Cashflows PVF @ 6% Present value 1 900 0.943396 849.0566 2 600 0.889996 533.9979 3 0 0.839619 0 4 500 0.792094 396.0468 Present value of cashflows 1779.1 Divide: Annuity PV at 6% 3.4651 Equivalent Annual cashflows 513.434