Question

Bianca took out a loan from the bank today for X. She plans to repay this loan by making payments of 44,283 dollars per month for a certain amount of time. If the interest rate on the loan is 1.35 percent per month, she makes her first payment of 44,283 dollars later today, and she makes her final monthly payment of 44,283 dollars in 4 months, then what is X, the amount of the loan?

Jabari owns a pet care center that has a cost of capital of 10.82 percent. The pet care center is expected to produce annual cash flows of 18,402 dollars for 8 years. The first annual cash flow of 18,402 dollars is expected later today. In addition to the annual cash flows of 18,402 dollars, the pet care center is also expected to produce a special, one-time cash flow of 59,595 dollars in 3 years from today. How much is Jabari’s pet care center worth?

A race track is expected to produce regular annual cash flows of 58,396 dollars with the first regular cash flow expected later today and the last regular cash flow expected in 9 years from today. In addition to the regular cash flows of 58,396 dollars, the race track is also expected to produce an extra cash flow of 82,287 dollars in 9 years from today. The cost of capital for the race track is 3.76 percent. What is the value of the race track?

Answer 1

Sol 1. Bianca is paying monthly annuity for Four Months starting today i.e. 44,283.00, monthly rate of interest is 1.35%; Initial Loan Borrowed by Bianca is nothing but the Sum of the Present Values of its cash flows discounted @ 1.35%. The Working Table is as under:-

Month	Cash Flow	DF @ 1.35%	Present Value of Cash Flows
0	44283	1	44283
1	44283	0.987	43693.14
2	44283	0.974	43111.14
3	44283	0.961	42536.89
4	44283	0.948	41970.3
	Initial Loan Amount Borrowed by Bianca		215594.47

Sol 2: Jabari is expecting annual cash flows for 8 years starting today i.e. $18,402.00; Jabari will also get a special cash flow in addition to the regular cash flow of $ 59,595 in the third year; J abari Pet Worth is nothing but the Sum of the Present Values of its cash flows discounted @ 10.82%. The Working Table is as under:-

Year	Cash Flow	DF @ 10.82%	Present Value of Cash Flows
0	18402	1	18402
1	18402	0.902	16605.31
2	18402	0.814	14984.03
3	77997	0.735	57309.08
4	18402	0.663	12200.92
5	18402	0.598	11009.67
6	18402	0.54	9934.73
7	18402	0.487	8964.75
8	18402	0.44	8089.47
	J pet care Worth		157499.95

Sol 3:   RT is expecting annual cash flows for 9 years starting today i.e. $58,396.00; RT will also get a special cash flow in addition to the regular cash flow of $ 82287 in the 9th year; RT value is nothing but the Sum of the Present Values of its cash flows discounted @ 3.76%. The Working Table is as under:-

Year	Cash Flow	DF @ 3.76%	Present Value of Cash Flows
0	58396	1.000	58396.00
1	58396	0.964	56279.88
2	58396	0.929	54240.44
3	58396	0.895	52274.90
4	58396	0.863	50380.59
5	58396	0.831	48554.92
6	58396	0.801	46795.42
7	58396	0.772	45099.67
8	58396	0.744	43465.37
9	140683	0.717	100918.77
	Race Track Value		556405.96