PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 2, Problem 33PS
- a. The cost of a new automobile is $10,000. If the interest rate is 5%, how much would you have to set aside now to provide this sum in five years?
- b. You have to pay $12,000 a year in school fees at the end of each of the next six years. If the interest rate is 8%, how much do you need to set aside today to cover these bills?
- c. You have invested $60,476 at 8%. After paying the above school fees, how much would remain at the end of the six years?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
You want to save money from your businessoperation to replace a truck that has been used indelivery. The truck will be replaced after 12 yearsfrom now and the replacement cost would be about$60,000. If you earn 5% interest on your savings,how much must you deposit at the end of each yearto meet the needs?
Savings for a Down Payment: You plan to buy a house in 5 years and need a down payment of $40,000. If you can invest your savings at an annual interest rate of 6%, how much should you deposit today to reach your down payment goal?
Education Fund Planning: You want to start saving for your child's education, which will begin in 10 years. The estimated cost of education is $50,000. If you assume an annual interest rate of 8%, how much should you deposit monthly to have enough funds when your child starts college?
Retirement Savings Goal: You are 30 years old and want to retire at 65. You estimate that you will need $1,000,000 for a comfortable retirement. Assuming an annual interest rate of 5%, how much should you save annually to reach your retirement goal?
Loan Repayment Strategy: You took out a loan of $15,000 for a home improvement project, and the loan has an annual interest rate of 7%. If you want to pay off the loan in 3 years, what will be your monthly payments?
Financial…
Suppose you wish to start up your coffee shop. You need to borrow $50,000 today. You intend to pay back $50,000 in equal payments, every year for 25 years. If the annual interest rate is 7%, how much do you need to pay the bank every year (annuities) for 25 years
Chapter 2 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 7SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Opportunity cost of capital Explain why we refer...
Ch. 2 - Prob. 3PSCh. 2 - Compound interest New Savings Bank pays 4%...Ch. 2 - Compound interest In 2017, Leonardo da Vincis...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Prob. 7PSCh. 2 - Future values In the five years preceding the end...Ch. 2 - Discount factors a. If the present value of 139 is...Ch. 2 - Prob. 10PSCh. 2 - Prob. 11PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Prob. 24PSCh. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 26PSCh. 2 - Prob. 27PSCh. 2 - Prob. 28PSCh. 2 - Prob. 29PSCh. 2 - Annuities due A store offers two payment plans....Ch. 2 - Amortizing loans A bank loan requires you to pay...Ch. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 34PSCh. 2 - Growing annuities You are contemplating membership...Ch. 2 - Prob. 36PSCh. 2 - Growing perpetuities and annuities Your firms...Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Prob. 41PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Prob. 44PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Calculating interest earned and future value of savings account. If you put 6,000 in a savings account that pays interest at the rate of 3 percent, compounded annually, how much will you have in five years? (Hint: Use the future value formula.) How much interest will you earn during the five years? If you put 6,000 each year into a savings account that pays interest at the rate of 4 percent a year, how much would you have after five years?arrow_forwardIf you are saving the same amount each month in order to buy a new sports car when the new models are released, which of the following will help you determine the savings needed? A. future value of one dollar ($1) B. present value of one dollar ($1) C. future value of an ordinary annuity D. present value of an ordinary annuityarrow_forwardConestoga Plumbing plans to invest in a new pump that is anticipated to provide annual savings for 10 years of $50,000. The pump can be sold at the end of the period for $100,000. What is the present value of the investment in the pump at a 9% interest rate given that savings are realized at year end?arrow_forward
- How much must be invested now to receive $50,000 for 8 years if the first $50,000 is received in one year and the rate is 10%?arrow_forwardUse the tables in Appendix B to answer the following questions. A. If you would like to accumulate $4,200 over the next 6 years when the interest rate is 8%, how much do you need to deposit in the account? B. If you place $8,700 in a savings account, how much will you have at the end of 12 years with an interest rate of 8%? C. You invest $2,000 per year, at the end of the year, for 20 years at 10% interest. How much will you have at the end of 20 years? D. You win the lottery and can either receive $500,000 as a lump sum or $60,000 per year for 20 years. Assuming you can earn 3% interest, which do you recommend and why?arrow_forwardFuture value; single amount You are saving for a new car. You place $10,000 into an investment account today. How much will you have after four years if the account earns (a) 4%, (b) 6%, or (c) 8% compounded annually?arrow_forward
- A student wants to save up for a car, assuming that he/she would be able to save up a certain sum every month or every three months. The car value in 4 years is expected to be 255000 LE, if the bank pays 0.14 interest compounded monthly? How much must the student put aside every month?____________ What will be the equivalent interest rate if the student saves every three months?_____________ How much must the student put aside every three months? _______________ please submit answers with steps quick as possible pleasearrow_forwardA student wants to save up for a car, assuming that he/she would be able to save up a certain sum every month or every three months. The car value in 4 years is expected to be 255000 LE, if the bank pays 0.14 interest compounded monthly? How much must the student put aside every month?____________ What will be the equivalent interest rate if the student saves every three months?_____________ How much must the student put aside every three months? _______________arrow_forward4. You want to save the down payment required to purchase a vacation home at the end of five years. If the required down payment is $25,000 and you can earn 5% a year on your savings account, how much do you need to set aside at the end of each year for the next four years?arrow_forward
- How much do you have to invest today to have $25,000 for the purchase of a car four years from now if the interest rate is 8% compounded annually?arrow_forwardHow much do you have to deposit today so that beginning 11 years from now you can withdraw $15,000 a year for the next 5 years (periods 11 through 15) plus an additional amount of $30,000 in the last year (period 15)? Assume an interest rate of 9 percent. The amount of money you have to deposit today isarrow_forwardHow much do you need to save each year for 30 years in order to have $775,000, assuming you are investing the money in an account that earns 8%? How much of the $775,000 comes from contributions (your out of pocket costs)?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
5 Steps to Setting Achievable Financial Goals | Brian Tracy; Author: Brian Tracy;https://www.youtube.com/watch?v=aXDuLxEJqBo;License: Standard Youtube License