PVFV-Excel_2003.doc

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1、TimeValueofMoneyinExcel1. Supposeyouanticipategetting$1000in3yearsfromyouruncleSimon,whosewordisasgoodasabanks.Ifthebankpays6%interestonsavings,howmuchistheanticipatedfuturepaymentworthtoday?2. Youhavebeenpromised$100attheendofeachofthenext5years.Ifyoucanget6%atthebank,howmuchisthispromiseworthtoday

2、?3. Aninsuranceagentistryingtosellyouanimmediate-retirementannuity,whichforasingleamountpaidtodaywillprovideyouwith12,000attheendofeachyearforthenext25years.Youcurrentlyearn9%onlow-riskinvestmentscomparabletotheretirementannuity.Ignoringtaxes,whatisthemostyouwouldpayforthisannuity?4. Youwerepromised

3、thefollowingpayments:12345100200300400500Whatsthepresentvalueofthesepaymentsat6%interestrate?5. Youdeposit$100andkeepitfor6yearsat6%interest.Howmuchwillyouhaveafter6years?6. Youmake10annualdepositsof100startingnow.Howmuchwillyouhaveattheendf10years(6%interest)?Howmuchwillyouhaveifyoumake10depositsea

4、chattheendofthenext10years?7. Supposeyouplantosave$1000today,$1500inoneyear,and1300attheendofyears2and3.Ifyoucanearnafixed5%rateonyoursavings,howmuchwillyouhave4yearsfromtoday?8. Youhavejustgraduatedfromtheuniversity,andthebalanceonyourstudentloanis100,000.Younowhavetopayofftheloanover10yearsatanann

5、ualinterestrateof10%.Thepaymentsareequal.Howmuchwillyouhavetopayoffannually?monthly?9. Youaregettinga$1000loanfromthebankat10%interest.Themaximumpaymentyoucanmakeperyearis$250.Howlongwillittakeyoutopayofftheloan?10. Youarelookingataninvestmentthatwillpay$1,200in5yearsifyouinvest$1,000today.Whatisthe

6、impliedrateofinterest?11. Whatisthepresentvalueofanapartmentyoucanletfor$1,000permonth?(firstpaymentimmediately)Consideranannualinterestof5%andaperiodof20years.12. Yourgenerousgrandmotherhasjustannouncedthatshehasopenedasavingsaccountforyouwithadepositof$10,000.Moreover,sheintendstomakeninemoresimil

7、argiftsattheendofthenext9years.Ifthesavingsaccountpays8%interest,howmuchwillyouhaveaccumulatedattheendof10years?13. AJoanMessineoborrowed$15,000ata14%annualinterestratetoberepaidover6years.Theloanisamortisedintosixequalannualend-of-yearpayments.a. Calculatetheannualend-of-yearpayment.b. Preparealoan

8、amortisationscheduleshowingtheinterestandprincipalbreakdownofeachofthepayments.c. Explainwhytheinterestportionofeachpaymentdeclineswiththepassageoftime.14. IftodayisOctober2004,whatisthevalueofthefollowingbond?AnIBMBondhasacouponrateof11.5%(whichispaideverySept.)andthefacevalueof$1,000.Thebondmature

9、sinSeptember2009.ThebondisratedAAA(WSJAAAYTMis7.5%).InvestmentAppraisalTechniques1. Wouldyoupay$800todaytogetthefollowingseriesoffuturecashflows:12345100150200250300Assumeinterestrateof5%.2. Youplantostartabusinessproducinganorganicfertiliser.Theexpectedcashflowsareasfollows:a. $6,000inyears1-8b. $2

10、,000salvagevalueinyear8Thebusinessrequiresaninitialinvestmentof$30,000.Istheprojectworthundertakingifthecostofcapitalis15%?3. Youareconsideringaprojectwiththefollowingcashflows:012345-1200100250500120400Calculatethereturnyouwouldmakeontheinvestment.Ifthebankoffers6%interest,wouldyouaccepttheproject?

11、4. The“InvestmentAppraisalExcelfilecontainsanexampleofcashflowswiththreechangesofsign(ex.3sheet).a. GraphtheNPVofthecashflowsusingdiscountratesbetween0%and100%.Usethisgraphtoapproximatelyidentifythethreeinternalratesofreturn.b. UseExcelsIRRfunctionwithitsGuessoptiontoidentifythethreeIRRsexactly.5. A

12、Aninvestmentprojecthasthefollowingcashflows:CF0=-1,000,000CF1-CF8=200,000eachIfr=12%,whatdecisionshouldbemadeusingNPV?IRR?6. *Thecompanyyouworkforisfacingacapitalrationingproblem.Itscapitalbudgetforthenextyearis$3millionanditneedstoallocatethemoneyinthemostefficientway(tomax.NPV).Ithasidentified12projectswhichcouldcreateapositiveNPVforthefirm(Investmentappraisal_s.xls:Cap.Rat).Theprojectsarenotdivisible.Whatcombinationofprojectswouldyouadvisethecompanytochoose?