Question

In: Finance

Intro It is the end of 2019. You plan to complete a Ph.D. in 5 years....

Intro

It is the end of 2019. You plan to complete a Ph.D. in 5 years. Your favorite uncle has promised to help you with your school expenses by giving you the following amounts for Christmas:

Year	2020	2021	2022	2023	2024
Cash flow	1,000	1,600	1,800	2,000	2,200

Your uncle is fairly wealthy and very reliable. You currently have $10,000 in a savings account paying an annual interest rate of 6%.

Attempt 1/5 for 10 pts.

Part 1

Create an Excel spreadsheet showing the years and cash flows as in the table above, then add a row that shows the number of years from now and another row that shows the present value of each cash flow. What is the sum of present values?

Hint: do not hardcode the discount rate into your formulas. Instead, keep it in a separate cell and refer back to it. You'll be asked to change in discount rate in parts 5 to 8.

Attempt 1/5 for 10 pts.

Part 2

You also want to know how much each gift will be worth in 2024 if you save it. Add another row to your spreadsheet and calculate the value of each cash flow in 2024. What is the sum of all future values?

Attempt 1/5 for 8 pts.

Part 3

What is the present value of the sum of future values calculated in the previous part?

Attempt 1/5 for 10 pts.

Part 4

Now assume that the interest rate is 4%. What is the present value of all the gifts?

Attempt 1/5 for 10 pts.

Part 5

Still assume that the interest rate is 4%. What is the future value of all the gifts?

Attempt 1/5 for 10 pts.

Part 6

Now assume that the interest rate is 10%. What is the present value of all the gifts?

Attempt 1/5 for 10 pts.

Part 7

Still assume that the interest rate is 10%. What is the future value of all the gifts?

Solutions

Expert Solution

Answers Part 1, Part 2 and Part 3:

Above excel with 'show formula':

Answer Part 4 and Part 5:

Answer Part 6 and Part 7:

jeff jeffy answered 2 months ago

Next > < Previous

Related Solutions

Intro It is the end of 2019. You plan to complete a Ph.D. in 5 years....

Intro It is the end of 2019. You plan to complete a Ph.D. in 5 years. Your favorite uncle has promised to help you with your school expenses by giving you the following amounts for Christmas: Year 2020 2021 2022 2023 2024 Cash flow 1,000 1,600 1,800 2,000 2,200 Your uncle is fairly wealthy and very reliable. You currently have $10,000 in a savings account paying an annual interest rate of 6%. Attempt 1/5 for 10 pts. Part 1 Create...

It is the end of 2020. You plan to complete a Ph.D. in 5 years. Your...

It is the end of 2020. You plan to complete a Ph.D. in 5 years. Your favorite uncle has promised to help you with your school expenses by giving you the following amounts for Christmas: Year 2021 2022 2023 2024 2025 Cash flow 1,200 1,600 1,800 2,000 2,200 Your uncle is fairly wealthy and very reliable. You currently have $10,000 in a savings account paying an annual interest rate of 8%. Questions: 1. Create an Excel spreadsheet showing the years...

Intro It is the end of 2019. You (foolishly) played the lottery and won the following...

Intro It is the end of 2019. You (foolishly) played the lottery and won the following cash flows, to be paid at the end of each year: Year 2020 2021 2022 2023 2024 Cash flow 1,300 1,600 1,800 2,000 2,200 The appropriate interest rate is 11%. What is the sum of present values? Now assume that the interest rate is 9%. What is the present value of all cash flows? Now assume that the interest rate is 15%. What is...

you plan to save $500 monthly for 2 years earning 5%interest. how much will you end...

you plan to save $500 monthly for 2 years earning 5%interest. how much will you end up with?

At the end of each year for the first 5 years, Cecil and Norma DeMille plan...

At the end of each year for the first 5 years, Cecil and Norma DeMille plan to contribute $1,000 to their daughter Sally's college fund. For the next 5 years they will contribute $2,000 at the end of each year, and then increase that amount to $3,000 until she turns 18 and is ready for college. What amount will they have accumulated for Sally's college fund if the account pays 6.35% annually? Please be very thorough with work and provide...

At the end of each of the next 8 years, you plan to put $25,000 in...

At the end of each of the next 8 years, you plan to put $25,000 in the bank. If the annual interest rate is 3%, what is the present value of this planned savings stream? What will the bank balance be at the end of the 8 year period? [Hint: once you know the present value of the savings stream, it's easy to work out the future value]

You plan on saving $12,300 at the end of each of the next 20 years and...

You plan on saving $12,300 at the end of each of the next 20 years and investing your savings at an annual interest rate of 8%. At the end of year 20 you plan on retiring. You plan on leaving your savings in investments yielding an annual rate of 8% and withdrawing from savings a constant amount for the next 30 years commencing at the end of your first year of retirement. How large a withdrawal can you afford to...

45.You plan on saving $12,300 at the end of each of the next 20 years and...

45.You plan on saving $12,300 at the end of each of the next 20 years and investing your savings at an annual interest rate of 8%. At the end of year 20 you plan on retiring. You plan on leaving your savings in investments yielding an annual rate of 8% and withdrawing from savings a constant amount for the next 30 years commencing at the end of your first year of retirement. How large a withdrawal can you afford to...

You spent $ 355 and you get $ 860 back at the end of 5 years....

You spent $ 355 and you get $ 860 back at the end of 5 years. Use the interest and interpolation tables by hand to determine the internal rate of return. Displays the interpolation on the spreadsheet.

You are about to graduate. You plan to continue your education at Harvard in 5 years....

You are about to graduate. You plan to continue your education at Harvard in 5 years. Your plan is to save $5,500 a year, beginning IMMEDIATELY. Overall, you are going to deposit 5 times in your account that pays 6.3%, annually. How much money will you have in your account 5 years from today? Include up to two decimals in your answer. A. $34,333.25 B. $43,433.87 C. $33,155.24 D. $23,511.15 E. $32,200.23

Subjects