Draw the cash flow diagram for the following data.
A company purchases a machine to make widgets for $10,000. the collect payment for their widgets at the end of the year in which they are delivered. At the end of 5 years the machine must be scrapped at which time its value is $0. The following is the net revenue generated by the widget machine.
Year 1 - $2,500
Year 2 - $3,500
Year 3 - $2,250
Year 4 - $3,000
Year 5 - $2,000

What is the present worth of the widget machine if the companies TVOM is 5.37%? $  
What is the future worth at the end of the 5 year life cycle? $

A construction company plans to invest in new equipment to improve their productivity. The planned investment is $500,000 now and $100,000 in year 1. The gross income for year 1 is $175,000, year 2 is $300,000, and year 3 is $600,000. Taxes related to the investment are $50,000 in year 1, $75,000 in year 2 and $100,000 in year 3.

Determine:

a) The before tax rate of return for the investment

b) The after-tax rate of return for the investment

c) How does the after-tax rate of return compare to the company’s MARR of 15%?

Please do not use excel

Assume you are evaluating a lease with annual payments of $530,000 per year under a 5 year lease. The after-tax cost of debt is 6% and the tax rate is 40%. Rather than occurring at the end of each year, you have realized that tax payments actually occur evenly throughout the year. Using the mid-year approximation, by how much (in present value terms) are you underestimating the tax benefits from the lease by assuming end of year rather than mid-year tax payments? Please show all work in excel.

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

1. $200 per year for 14 years at 4%.

   $  

2. $100 per year for 7 years at 2%.

   $  

3. $200 per year for 8 years at 0%.

   $  

4. Rework previous parts assuming they are annuities due.

   Present value of $200 per year for 14 years at 4%: $  

   Present value of $100 per year for 7 years at 2%: $  

   Present value of $200 per year for 8 years at 0%: $  

(a) The S&P/ASX200 price index opened the year at 5,777 and closed at 6,120 by the end of the year. The equivalent accumulation index went from 56,240 to 64,425. What is the annual rate of return on each of these indices? Explain the difference.

(b) Using the approach covered in your textbook calculate the geometric average annual rate of return over five years given the following annual rates, year 1 = 5.10%, year 2 = 4.95%, year 3 = 4.83%, year 4 = 4.75% and year 5 = 4.70% . What is the arithmetic average? Explain the difference.

PRESENT VALUE OF AN ANNUITY

Find the present values of these ordinary annuities. Discounting occurs once a year. Round your answers to the nearest cent.

1. $700 per year for 16 years at 6%.

   $  

2. $350 per year for 8 years at 3%.

   $  

3. $800 per year for 6 years at 0%.

   $  

   Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.

4. $700 per year for 16 years at 6%.

   $  

5. $350 per year for 8 years at 3%.

   $  

6. $800 per year for 6 years at 0%.

   $  

Exact Photo Service purchased a new color printer at the beginning of Year 1 for $38,600. The printer is expected to have a four-year useful life and a $3,400 salvage value. The expected print production is estimated at $1,788,000 pages. Actual print production for the four years was as follows:

The printer was sold at the end of Year 4 for $3,550.

Required
a. Compute the depreciation expense for each of the four years, using double-declining-balance depreciation.