Company PQR is starting a sinking fund for two future purchases. The risk free rate is 3.2%. They will need $500,000 in ten years and another $800,000 in 13 years (fromtoday).How much should they be saving per month if they were just saving for the first item?$4546.45xHow much should they be saving per month if they were just saving for the second item?$4546.45XHow much should they be saving per month if they wanted level payments for the two purchases?$7833.75XWith level payments, will they have enough to buy the first item on schedule?1142767.11

A sinking fund is a fund that is established to meet future debt obligations. Any individual or…

Answered: Company PQR is starting a sinking fund…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Company PQR is starting a sinking fund for two future purchases. The risk free rate is 3.2%. They will need $500,000 in ten years and another $800,000 in 13 years (from today). How much should they be saving per month if they were just saving for the first item? $ How much should they be saving per month if they were just saving for the second item? $ How much should they be saving per month if they wanted level payments for the two purchases? $ With level payments, will they have enough to buy the first item on schedule?
Suppose you want to purchase equipment costing $500 and which will give you a cash flow of $35 every year. The equipment has a useful life of 7 years. Every year the equipment's price decreases by 34% and the discount rate is 4%. What is the NPV of the equipment if you purchase it now and when should you buy the equipment
Your organization has been asked to invest in a continuing care retirement center. Your investment will be $600,000 per year for the next 5 years. After 5 years, cash flows will be $400,000 per year for the next 15 years. If your discount rate is 10%:(a) what is the present value of the investment?(b) what is the present value of the cash flows?(c) what is the profitability index?
You have the opportunity to make an investment that costs $1.000,000. If you make this investment now, you will receive $250,000 one year from today, $200,000, $150,000 and $ 400,000 two and three years from today, respectively. The appropriate discount rate for this investment is 11 percent Should you make the investment? What is the net present value (NPV) of this opportunity?
You are thinking about purchasing an investment from Get-Rich-Quick Investmemnt company. If you buy the investment, you will receive $50 every month for five(5)years. Payment will be made at the end of each month. If your required rate of return is 9% how much should you be willing to pay for this investment? Group of answer choices $4,632.87 $2,735.25 $2,525.10 $2,408.67
A small company wishes to set up a fund that can be used for technology purchases over the next 6 years. Their forecast is for $9,000 to be needed at the end of year 1, increasing by 5% each year thereafter. The fund earns 10% per year. How much money must be deposited to the fund at the end of year 0 to just deplete the fund after the last withdrawal?
You have the opportunity to make an investment that costs $1.000,000. If you make this investment now, you will receive $250,000 one year from today, $200,000, $150,000 and 400,000 two and three years from today, respectively. The appropriate discount rate for this investment is 11 percent. .a. Should you make the investment?
You want to set up a Boba Tea house and run for 4 years. For your financial analysis purpose, you estimate an initial investment and an annual free cash flow. Your initial investment will be 0. Your annual free cash flow from operation will be $30,000 (at the end of each year) for the next 4 years. What is a value of the Boba Tea house (present value calculation)? Here we assume a discount rate is 8%.
The price of a car you want is $36,000 today. Its price is expected to increase by $1000 each year. You now have $22,000 in an investment account, which is earning 8% per year. How many years will it be before you have enough to buy the car without borrowing any money? (Use Goal Seek to determine the time taken.) The time taken is determined to be..... years.
You plan to buy a financial product today. You expect that the financial product will give you $100 at the end of first 5 years (that is, you receive $100 starting one year from today for 5 years). Your required rate of return is 10%. If this same financial product has an actual market price of $370, what is the expected rate of return E(r)? Should you buy this financial product? O 9.0076%; Don't Buy O 9.0076%; Buy O 10.9559%; Buy O 11.2276%; Don't Buy
You can purchase an equipment for $4,000. The equipment will provide benefits worth $900 a year. The expected life of the equipment is 8 years. It is expected that the price of the equipment will decrease by 15% per year. If the discount rate is 12%, would you buy the equipment today or will wait to purchase? When is the best time to purchase it? give excel file solution
You are considering a safe investment opportunity that requires a $1,080 investment today, and will pay $710 two years from now and another $610 five years from now. a. What is the IRR of this investment? b. If you are choosing between this investment and putting your money in a safe bank account that pays an EAR of 5% per year for any horizon, can you make the decision by simply comparing this EAR with the IRR of the investment? Explain. a. What is the IRR of this investment? The IRR of this investment is _____________%. (Round to two decimal places.)

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS