Assignment #2 SPREADSHEET

xlsx

School

Michigan State University *

*We aren’t endorsed by this school

Course

311

Subject

Finance

Date

Feb 20, 2024

Type

xlsx

Pages

5

Report

Uploaded by KidFogOyster36

FI 311 - Spring 2023 - ASSIGNMENT #2 Rules: * You must calculate your answers in this spreadsheet. Then you must do the following: Submit your spreadsheet to the Assignments dropbox in D2L. SPREADSHEETS SUBMITTED TO CONNECT OR EMAILED TO ME WILL NOT BE GRADED. *You must show your work to get credit for a correct answer. Answers entered without any work shown will receive a grade of 0. *Each question is worth 5 points; incorrect answers will be awarded 2.5 points. Questions not answered will receive 0 points. *The Assignment is due on Tuesday, Feb. 21 at 10pm. *Late assignments will be assessed a 7.5 point penalty, increasing by 7.5 points every 12 additional hours completed after the due time. *No late assignments will be accepted after 10pm on Thursday, Feb. 23. Problem 1 120 monthly rate: 0.0056666666667 FV: 4925.2512590704 Problem 2 The down payment: 230000 how much loaned: 2070000 51.7255607511306 40018.8991667915 Problem 3 41,400 3%: 0.03 FV: 48956.144157689 ($10,112.79) Upon graduation you receive $2500 in gifts, which you decide to invest for 10 years. If you earn 6.8% annually on your investment, compounded monthly, how much will you have in the account at the end of the 10th year? So we will have 4,925.25 dollars in the account at the end of the 10th year You want to buy an Audi Q3 on your 26th birthday. You have priced these cars and found that they currently sell for $41,400. You believe that the price of this model will increase by 3% per year until you are ready to buy. You can presently invest to earn 6.5% annually. If you have just turned 20 years old, how much must you invest per year to be able to purchase the car in cash in 6 years? Per year you invest 10,112.79 to purchase the car in 6 years The CEO of your company wants to buy another Bugatti Veyron, but he will need to get a loan to buy it. The bank is willing to give him a 5-year loan at 6% interest, but they are requiring him to make a 10% down payment. The car costs $2,300,000. How much will the monthly payments be? The monthly payments on the car will be 40,018.90 dollars.
Problem 4 1.072 PV: 13992.537313433 You would want 13,992.54 dollars Problem 5 mon payment 1562.5 -3456334.9752 Rate: Monthly interest rate = 0.01 NPER= 360 FV = $179,950.76 PV = $182,644.96 Problem 6 1.1334615816707 13.34615 13.34% Annual Return on Investment Problem 7 You have won a game show prize of a trip to Tahiti in one year valued at $15,000. If instead, you are able to take the present value of the trip in cash, how much cash would you want if the rate you can earn is 7.2% annually, compounded annually? You would want 13,992.54 dollars You have just graduated from MSU, and have landed a job with a starting salary of $75,000 per year. You have decided to buy a house, and you have $10,000 saved up from your part-time job at Qdoba. The Eighth National Bank of DeWitt is offering to give you a 30-year mortgage at 9.7% annual interest with monthly payments, but they will not give you a loan that will involve monthly payments of more than 25% of your income. Assuming you will borrow as much as you can from this bank, and assuming closing costs of 4% of the amount borrowed, what is the highest price you will be able to pay for the house? The highest price you will be able to pay for the house would be 182,644.96 dollars A company invests $1 million to clear land and plant pine trees. The trees will mature in 10 years and the company expects to sell them for $3.5 million. What will be its annual rate of return on this investment? c You want to buy a parcel of land in an area of town in the direction of future development. The lot costs $55,000. The monthly payments on a loan to buy the lot would be $805.76. If the bank is charging you 9% interest per year, how years will it be before you own the land, free and clear?
9669.12 5.68821154355308 Using PVAF table finding 9% and 5.68 We would get 9 years before you own the land Problem 8 10643.7840258714 Each month you must invest 10,643 dollars Problem 9 PV: 182365.344221536 The most you should invest is 182,365.34 dollars Problem 10 PV = 205009.87179738 PV after 5 years = 287013.82051633 492023.69231371 Problem 11 1% 0.1100034850902 You have become bored with your job, you decide to start your own business. A new business takes money, so you start a 5-year plan. At an interest rate of 6 percent per year, how much must you invest each month to have $60,000 in your new business fund in 5 years? The engineering staff at the Sun Shipping Company has informed decision-makers that substantial money can be saved on the fleet's fuel bills if the ships' engines are adapted. Based on the cost of fuel, the engineers estimate that the firm will save $50,000 each year for the first 5 years and save $70,000 per year for the following five years. If these estimates are accurate, what would the company be willing to pay to adapt the engines? The company can earn 7% annually on its investments. The company would pay up to 492,023.69 dollars to adapt the engines An industrial bank will loan you $7,500 for two years to buy miscellaneous equipment for your firm. The loan must be repaid in equal monthly payments. The amount of the monthly payments will be $349.56. What annual rate of interest is the bank charging you? The bank is charging us 11% annual interest rate. You friend has developed a new design of mouse trap that he said works better than any other mouse trap available. He needs money for production, so he has asked you to invest in the new venture. He is offering you a percentage of the profits for the next seven years, and has estimated your share of the cash flows in Year 3 to be $55,000, increasing by $20,000 per year through Year 7 (there will be no cash flows in Years 1 or 2). You have decided this is a pretty risky proposition, so you are requiring a return of 18% annually. What is the most you should be willing to invest in this project?
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Problem 12 Monthly interest rate = 0.0091666666667 2.7392698 NPER= 32.871237771455 Problem 13 2 25 Problem 14 FV= $326,661.53 Rate= 0.01 NPER= 60 PMT= 3999.79 PV= $179,810.71 Problem 15 You have just withdrawn $143,806.59 from your investment account. You started with $50,000, made monthly payments into the account in the amount of $2,000, and received an annual interest rate of 11%. How many years was this investment in place? 2.7 years was how long the investments were in place What is the value of a perpetuity that pays a quarterly dividend of $0.50 and has a required rate of return of 8%? The Value of perpetuity is 25 You plan to buy a new BMW i8 5 years from now. You expect the price of this model of car to increase by 5% per year over the next 5 years. You have calculated that, when you buy the car 5 years from now, your monthly payment will be $3999.79, based on a 5 year loan at 12% annual interest. What is the current price of the car? The current price of the car is 179,810.71 dollars Ingham Airlines has leased out a jet under a 12-year arrangement. The lease requires the lessee to pay Ingham Airlines annual payments of $600,000 beginning next year. If Air Atlantic can invest at 6 percent annually, what is the lease arrangement worth to it? the lease agreement is worth 5,030,306.36 million dollars after 12 years.
$5,030,306.36 BONUS PROBLEM 100000=640.38(1.03)^n (used natural log to solve) ln(156.15)/ln(1.03) = 170.87 months 170.87/12 = 14 You want to start saving for your daughter's college education now. She will enter university at age 18, and you have decided to put $100,000 into an account to fund her education when she turns 18. If monthly deposits of $640.38 will allow you to reach your goal, how old is your daughter now? Assume you can earn 3% annual interest on your savings, compounded monthly. It will take 14 years for her to reach her goal so if her daughter is 1 years old when she started she would be 15 by the time she can save that much money.