You decide to give your school an endowment that will pay out $50 K per year forever,with a continuously compounded annual increase of 3%. Assuming that you canlock in an interest rate of 5%, gure out how much this endowment would cost.What is the total value of this income stream?
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You decide to give your school an endowment that will pay out $50 K per year forever,with a continuously compounded annual increase of 3%. Assuming that you canlock in an interest rate of 5%, gure out how much this endowment would cost.What is the total value of this income stream?
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- 1. You decide to give SCU an endowment that will pay out $50 K per year forever,with a continuously compounded annual increase of 3%. Assuming that you canlock in an interest rate of 5%, gure out how much this endowment would cost.What is the total value of this income stream? 2.Suppose Aunt Grace wanted to give annual increases of $2,000 per year. How would this change the computations above? Give values for the amount Aunt Grace would have to pay to fund the income stream for 25 years, 50 years, 100years, 200 years, and forever. (Hint: You need only integrate by parts once.) 3. In addition to the $1 M already deposited there by Aunt Grace, how much would Aunt Margaret have to add to the fund to enableit to pay out an income stream ofR(t) = 60 +t forever?1. You decide to give SCU an endowment that will pay out $50 K per year forever, with a continuously compounded annual increase of 3%. Assuming that you can lock in an interest rate of 5%, figure out how much this endowment would cost. What is the total value of this income stream? 2. Suppose Aunt Grace wanted to give annual increases of $2,000 per year. How would this change the computations above? Give values for the amount AuntGrace would have to pay to fund the income stream for 25 years, 50 years, 100years, 200 years, and forever. (Hint: You need only integrate by parts once.) 3. You take all the information about Aunt Grace's gift to your not-quite-so-wealthy Aunt Margaret. In addition to the $1 M already deposited there byAunt Grace, how much would Aunt Margaret have to add to the fund to enable it to pay out an income stream of R(t) = 60 +t forever? 4. Let's revisit the income stream from your endowment to SCU in the first problem, which is $50 K per year with 3% continuously…1. You decide to give SCU an endowment that will pay out $50 K per year forever,with a continuously compounded annual increase of 3%. Assuming that you canlock in an interest rate of 5%, gure out how much this endowment would cost.What is the total value of this income stream? 4. Let's revisit the income stream from your endowment to SCU in the rst prob-lem, which is $50 K per year with 3% continuously compounded annual increase.Instead of the 5% investment rate we used in Problem 1, compute the presentvalue of this income stream (lasting forever) assuming a constant interest rater. What is the present value of the income stream ifr= 0:02. For which values of r is the present value finite?
- Suppose you invest $2,000 today and receive $11,000 in five years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has the same IRR as the first one, what is the amount you will receive each year?An example of how to calculate net present value is done using the following. Imagine you have been given an investment opportunity wherein if you invest $1,200 today, you will receive $650 dollars at the end of each year for the next 5 years. You could separately choose to invest your money at 10% interest each year. Should you take the investment opportunity? To find the answer, use the NPV formula:Suppose you invest $3,000 today and receive $10,000 in 25 years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the amount you will receive each year? a. What is the internal rate of return (IRR) of this opportunity? The IRR of this opportunity is%. (Round to two decimal places.) b. Suppose another investment opportunity also requires $3,000 upfront, but pays an equal amount at the end of each year for the next 25 years. If this investment has the same IRR as the first one, what is the amount you will receive each year? The periodic payment that gives the same IRR is $ (Round to the nearest cent.)
- You are considering a one-year investment. If you invest $1 250 you will get back $1 350. What rate is this investment paying?An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If the rate of interest earned on the investment is 8%, what is the present value of this investment? What is its future value? How do you solve this with excel?You have an investment opportunity that requires an initial investment of $5,000 today and will pay $6,000 in one year. What is the IRR of this opportunity?
- You are looking to invest your savings and want to earn a 10% annualized return. You can choose from the following three options:Project A: You will receive $100 at the end of two years.Project B: You will receive $50 at the end of one year and another $50 at the end of two years.Project C: You will receive $80 at the end of one year and another $20 at the end of two years.Calculate the present value of each option, which option should you pick?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?An investment will generate $12,000 a year for 30 years. If you can earn 12 percent on your funds and the investment costs $100,000, calculate the present value of investment. Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Should you buy it?-Select-YesNoItem 2 Calculate the present value of investment, if you could earn only 9 percent. Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Should you buy it in this case?