Question

1. Orlando expects to have a monthly cash flow of $ 3,000 after taxes. Additional has the following monthly expenses: Rent $ 750, student loan payment $ 200, utilities $ 150, food $ 300, recreation $ 600, vehicle expenses $ 200 and purchase of clothing $ 150. What is your "net cash flow" for the current month?

2. If Gustavo wants to have $ 25,000 in 5 years and can get an 8% interest, how much will he need to invest today?

3. How much money will you have if you invest $ 75 per month, for 36 months, compounded annually at 10%?

Answer 1

1. Calculation of Net cash flows

Cash Flows after taxes = 3000

Total of monthly expenses

Rent 750 + Student loan 200 + Utilities 150 + Food 300 + recreation 600 + vehicles expenses 200 + purchase of clothing 150 = 2350.

Net cash flows = Cash inflow - Monthly expenses

= 3000 - 2350

= 650

2. You need to calculate the present value of 25000 , Period = 5 years Interest =8%

PV = FV / (1+r)ⁿ

= 25000 / (1.08)⁵

= 25000 / 1.46932808

= 17014.58 approx

$17014.58 approx need to deposit today to get the 25000 in 5 years at 8% interest.

3. Monthly payment = 75, No fo periods = 36, rate 10% compounded annuly.

You need to calculate the monthly rate for this.

= (1.10)^1/12 - 1

= 1.00797414 - 1

= 0.797414%

Now calculate Fv. As factors might not avialable in table for this rate. So use excel or financial calculator to solve this.

Put values in texas ba 2 in TVM as N=3, I/Y = 0.797414%,PMT =75, PV =0, Compute fv= 3113.19

You will have 3113.19 approx. after 36 months.