1. Richard has just purchased a four-year-old used car, pay $3000 for it. A friend has suggested that he determine in advance how long he should keep the car so as to ensure the greatest overall economy. Richard has decided that, because of style changes, he would not want to keep the car longer than 4 years, and he has estimated the annual expenses and MVs for years 1 through 4 as follows. If Richard's capital is worth 12% per year, at the end of which year should he dispose of the car? Annual expenses MV at end of year Year 1 $950 2,250 Year 2 $1,050 1,800 Year 3 $1,100 1,450 Year 4 $1,550 1,160

George has planned ahead and identified his dream house purchase in 3 years’ time. The current value of the house is $580 000. It is expected that the house will increase in value at a rate of 4.5% p.a. 4) How much does he need to borrow from the bank at the end of year 3 to buy the house? (Assume George will borrow 90% from the bank)

You decide to make monthly payments into a retirement fund earning 4.75% compounded monthly. Note: Payments are made at the end of each period.

In eight years, when he is discharged from the Air Force, Steve wants to buy a $30,000 power boat.   Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.   Required: What lump-sum amount must Steve invest now to have the $30,000 at the end of eight years if he can invest money at: (Round your final answer to the nearest whole dollar amount.)                                               Present Value 1. Eleven percent   2. Twelve percent

1. Jose Garcia's life long dream is to own a fishing boat to use in his retirement. Jose has  recently come into an in heritance of $400,000. He estimates that the boat he wants will cost $300,000 when he retires in 5 years. How much of his in heritance must he invest at an annual rate of 8% compounded annually) to buy the boat at retirement? 2. Refer to the data in BE6.7. Assuming quarterly compounding of amounts invested at 8%, how much of Jose Garcia's in heritance must be invested to have enough at retirement to buy the boat?

Ronnie Cox has just inherited $27,000. How much of this money should he set aside today to have $19,000 to pay cash for a Ventura Van, which he plans to purchase in one year? He can invest at 1.7% annually, compounded annually.

Johnny's Lunches is considering purchasing a new energy-efficient grill. The grill will cost $32,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $8,000. The grill will have no effect on revenues but will save Johnny's $16,000 in energy expenses. The tax rate is 30%. a). What are the operating cash flows each year? b). What are the total cash flows in each year? c). Assuming the discount rate is 12%, calculate the net present value of the cash flow stream. Should the grill be purchased?

After several years of working, Katy has saved $125,000. If she invests that $125,000 in a savings fund that adds 4% each year, about how much will her savings account have after 15 years? For this question, ignore compounding and taxes, and assume Katy does not put additional money into savings. A) $185,000 B) $175,000 C) $200,000 D) $190,000

A father is trying to save for his daughter’s wedding in two years. (Long engagement!). He thinks he can make the following contributions to an account: $14,545.00 today and $13,130.00 in one year. The father thinks he can earn 7.00% in the market each of the next two years. If the wedding is expected to cost $52,815.00 two years from today, how much will he need to contribute at the time of the wedding to cover its cost?

Following the last question - John is evaluating the idea to open an ice cream shop on a piece of land. The followings are what he might include in the cash flows: Instead, John can earn $120,000 if he decides to sell the land today. He bought this land for $350,000 two years ago. • Outfitting the space for an ice cream shop would require a capital expenditure of $150,000 today. It'll require an investment of $30,000 in inventories for making the ice creams today. What are the opportunity costs of opening the ice cream shop? 1 · . -$120,000 O-$180,000 O-$350,000 O-$270,000 4