Question 1 : After placing $13,000 in a savings account paying annual compound interest of 3%, Leona will accumulate what amount if she leaves the money in the bank for 4 years?
Question 2 : You have just introduced "must have" headphones for the iPod. Sales of the product are expected to be 20,000 units this year and are expected to increase by 16% annually in the future. What are the expected sales in each of the next three years? If the 20,000 units were expected to increase by 18% a year, what are the expected sales next year for this product?
Question 3 : What is the present value of a $650 perpetuity discounted back to the present at 10%? What is the present value of the perpetuity?
Question 4 : What is the present value of a perpetual stream of cash flow that pays $80,000 at the end of one year and grows at a rate of 5% indefinitely? The rate of interest used to discount the cash flows is 10%. What is the present value of the growing perpetuity?
Question 5
You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
|
End of Year A
|
|
|
|
S 1.000
|
S 1.000
|
S 5.000
|
|
7,000
|
1,000
|
5,000
|
|
3,000
|
1,000
|
(5,000)
|
|
(4,000)
|
1,000
|
(5,000)
|
|
4,000
|
3,000
|
15,000
|
What is the present value of investments A, B, and C if the appropriate discount rate is 10%?