Suppose that you invest $100 in an account for 20n years. This account will credit you 5% annual effective rate of interest for the first 5 years, 5% annual effective rate of discount for the send 5 years, 5% simple interest for the third 5 years, and 5% simple rate of discount for the last 5 years. How much will you have at the end of the 20 years?

*hint use equations for from these chapters*

Jan sold her house on December 31 and took a $30,000 mortgage as part of the payment. The 10-year mortgage has an 11% nominal interest rate, but it calls for semiannual payments beginning next June 30. Next year Jan must report on Schedule B of her IRS Form 1040 the amount of interest that was included in the two payments she received during the year.

a. What is the dollar amount of each payment Jan receives? Round your answer to the nearest cent.

b. How much interest was included in the first payment? Round your answer to the nearest cent.
How much repayment of principal was included? Do not round intermediate calculations. Round your answer to the nearest cent.

c. How much interest must Jan report on Schedule B for the first year? Do not round intermediate calculations. Round your answer to the nearest cent.
Will her interest income be the same next year?

d. If the payments are constant, why does the amount of interest income change over time?

What does working capital management encompass? What functional decisions are involved, and what underlying principle or trade-off influences the decision process?

1. 4. (Annuity payments) The Knutson Corporation needs to save $15 million to retire a $15 million mortgage that matures in 10years. To retire this mortgage, the company plans to put a fixed amount into an account at the end of each year for 10years. The Knutson Corporation expects to earn 5.7 percent annually on the money in this account.
   1. What equal annual contribution must the firm make to this account to accumulate the $15 million by the end of 10years?
   2. Prepare, on a spreadsheet, how the deposits will accumulate to $15 Million

You are to start a new job earning $10 000 / month, plus allowances to the sum of $2300.00/month.

You are on contract for 3 years after which a review will be done to determine your progress.

You are confronted with an offer to invest in real estate which would entail utilising some of your allowances to pay for it. The investment will require you to spend over a 5 year period to complete payment. How would you go about making a decision about what to do or not to do?

Based on the projections, Decker will have

3. (Annuity payments) Mr. Bills Preston, Esq., purchased a new house for $280,000. He paid $80,000 up front on the down payment and agreed to pay the rest over the next 25 years in 25 equal annual payments that include principal payments plus 6.2 percent compound interest on the unpaid balance.

1. What will these equal payments be?
2. Show on a spreadsheet how the loan will be paid off

The healthcare sector, on average, uses 30% debt financing in its long-term capital mix. Rank the following industries within the sector in descending order of debt usage. Justify your rankings.

Biotechnology

Facilities (hospitals and nursing homes)

Medical equipment and supplies

Pharmaceuticals

You can purchase a tract of land for $75,000 that you believe you can develop and sell as a residential development. Your development costs are $60,000 to be incurred immediately. You expect to sell all the lots in years 3-5 at a net income of $70,000, $85,000, and $68,000 respectively. Your required rate of return is 12 percent. Do you purchase the tract of land? (4 points)

CJ Lance Co. (Ch 10) CJ Lance Co. is considering two Mutually Exclusive Projects Project Alpha-1 is expected to generate cash flows of $3,250 each year of its 5 year life. The project will cost $11,000. Project Beta-2 is expected to produce $8,000 in cash flows per year. It also has a 5 year life, and costs $27,750. The Cost of Capital is 12% and these projects are of normal risk.

a. Calculate the NPV, IRR, and MIRR for each of the projects.

b. Given that they are mutually exclusive, which project should be selected based on each ranking method?

c. Now which project should be chosen? Why?

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, and it would cost another $19,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $511,000. The machine would require an increase in net working capital (inventory) of $17,000. The sprayer would not change revenues, but it is expected to save the firm $442,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.

1. What is the Year 0 net cash flow?
   $
2. 
   
3. 
   
4. 
   
5. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Year 1	$
   Year 2	$
   Year 3	$

6. 
   
7. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
8. 
   
9. 
   
10. 
    
11. If the project's cost of capital is 13 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
    $  
    
    Should the machine be purchased?

Pure Expectations Theory

The yield on 1-year Treasury securities is 6%, 2-year securities yield 6.2%, 3-year securities yield 6.3%, and 4-year securities yield 6.5%. There is no maturity risk premium. Using expectations theory and geometric averages, forecast the yields on the following securities:

a. 1 year security, 1 year from now

b. 1 year security, 2 years from now

c. 2 year security, 1 year from now

d. A 3 year security , 1 year from now

Assume you purchased a share of stock in Verizon communications at the beginning of 2017 for

$77.0077.00.

A year later the stock was worth

$78.1578.15 ,

but during 2017 it paid a dividend of

$5.165.16.

Calculate the following:

a. Income.

b. Capital gain (or loss).

c. Total return

(1) In dollars.

(2) As a percentage of the initial investment.

a. The current income received is

$nothing.

(Round to the nearest cent.)b. The capital gain (or loss) is

$nothing.

(Enter a loss as a negative number and round to the nearest cent.)c. (1) The total return in dollars is

$nothing.

(Round to the nearest cent.) (2) The total return as a percentage of the initial investment is

nothing %.

(Enter as a percentage and round to two decimal places.)

For this assignment, you should use your FINANCIAL CALCULATOR, NOT EXCEL. It is not enough to provide answers without any explanation. You are required to write down the inputs into your calculator and the output. All your calculations should be performed using your calculator’s PV, I, PMT, FV, and N keys.

Problem 2 (40 points)

1. We now have a $20 million partially-amortizing (balloon) mortgage to be repaid over 10 years with constant annual payments and a final balloon payment of $15 million. The fixed interest rate on the mortgage is 8%.
   1. What is the periodic debt payment?
   2. Using the PV method, compute the outstanding balance at the end of year 5.
   3. Redo the calculation in b using the FV method.
   4. What would be the periodic debt payments if they were made monthly rather than annually?
   5. Would the borrower pay more or less interest in total compared to annual payments?