Phyllis invested $8,500, a portion earning a simple interest rate of 3 1/4% per year and the rest earning a rate of 3% per year. After one year the total interest earned on these investments was $271.25. How much money did she invest at each rate?

at 3 1/4% per year $_______

at 3% per year $________

A contractor was doing the 10-year planning for a construction business, which uses a MARR of 15% per year. The contractor anticipates income of $150,000 per year for years 1-5, and income of $200,000 per year for years 6-10.

1. Draw the cash flow diagram.
2. What is the future value (in year 10) of the income? (show steps and calculations)

You make deposits at the end of each month into an account earning interest at a rate of 6%/year compounded monthly. Your deposits will be $2000/month in the first year, $2200/month in the second year, $2420/month in the third year, $2662 in the fourth year, and so on. How much will be in your account at the end of 40 years? No Excel answers please.

A company’s weighted average cost of capital is 13.2% per year. A project requires an investment of $120,000 today and it is expected to generate after-tax cash flows of $30,000 at the end of year 1, $40,000 at the end of year 2, $50,000 at the end of year 3, and $60,000 at the end of year 4. What is the project’s annual modified internal rate of return?

A total of 30,000 units were sold last year. The contribution margin per unit was $2 and fixed expenses totaled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same profit as earned last year?

A three-year-old machine has a cost of $19,100, an estimated residual value of $2,600, and an estimated useful life of 33,000 machine hours. The company uses units-of-production depreciation and ran the machine 4,400 hours in year 1; 8,050 hours in year 2; and 8,200 hours in year 3. Calculate the net book value at the end of the third year.

Suppose a company has proposed a new 4-year project. The project has an initial outlay of $25,000 and has expected cash flows of $7,000 in year 1, $9,000 in year 2, $12,000 in year 3, and $13,000 in year 4. The required rate of return is 11% for projects at this company. What is the net present value for this project? (Answer to the nearest dollar.)

Use tables and cash flow diagram: The energy costs of a company involved in powder coating of outdoor furniture are expected to increase at a rate of $400 per year. The cost at the end of the next year (year 1) is expected to be $13,000. How many years will it be from now before the equivalent annual cost is $16,000 per year, if interest is 8% per year?  

Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2, a dividend in year 2 of $3, and a dividend in year 3 of $4. After year 3, dividends are expected to grow at the rate of 7% per year. An appropriate required return for the stock is 12%. Using the multistage DDM, the stock should be worth __________ today.

$85.60

$65.13

$63.80

$67.95

Suppose MPC is 0.3, use the spending multiplier to fill in the values for an autonomous government spending of $700.

What are some of the problems with the spending multiplier?

(10 Points)

[You must review the literature about the multiplier]