( 5 points )
What is the total present value of the following cash stream , discounted at 8 percent ? ( 5 points )
Year Amount 1 400 2 750 3 945 4 145 5 78
3 . If you invested $ 2,000 per year into an IRA for 30 years and received 6 percent return each year , what would the account balance be in 30 years ? ( 5 points )
4 . A friend gives you a proposition . If you give him 1,500 dollars today , he will guarantee your receive 12 percent a year for the next 5 years . How much money will you receive from him at the end of 5 years ? ( 5 points )
5 . You want to buy a new Computer Aided Design ( CAD ) system for your business . The cost of the system is $ 150,000 and you expect to save over $ 40,000 per year in reduced labor costs . Please calculate the net present value of the CAD if your required return is 10 percent and the life of the system is expected to be 5 years . ( 10 points )
6 . Your company is considering converting its heating system in the main office from coal to heating oil . The initial cost of removing the coal fired furnace and installing an new oil fired unit is $ 60,000 . The life of the analysis is 7 years . In the past you spent $ 25,000 per year on coal . The new company says you will spend no more than $ 15,000 per year on heating oil . If your required return is 12 percent , should you make this investment ? Please calculate the net present value of this project . ( 10 points )
7 . You have collected the following information :
a . the yield on your company ’ s preferred stock 8 % b . the yield on your company ’ s debt 10 %