Exam 5: Discounted Cash Flow Valuation

Walker's charges a daily rate of .049 percent on its store credit cards.What interest rate is the company required by law to report to potential customers? Assume each quarter has exactly 91.25 days.

Today, you are purchasing a 10-year, 4.8 percent annuity at a cost of $50,000.The annuity will pay annual payments starting one year from today.What is the amount of each payment?

Julie is borrowing $14,950 to purchase a car.The loan terms are 48 months at 6.95 percent interest, compounded monthly.How much interest, rounded to the nearest dollar, will she pay on this loan if she pays the loan as agreed?

An amortized, 3-year loan has annual payments and an effective annual rate of 14.56 percent.What is the APR?

Travis is buying a car and will finance it with a loan that requires monthly payments of $265 for the next four years.His car payments can be described by which one of the following terms?

Which one of these is a perpetuity?

The Egg House just borrowed $660,000 to build a new restaurant.The loan terms call for equal annual payments at the end of each year.The loan is for 15 years at an APR of 8.35 percent.How much of the first annual payment will be used to reduce the principal balance?

What is the effective annual rate of 9.6 percent compounded semiannually?

Roberto can afford car payments of $450 per month for 4 years.If the interest rate is 5.3 percent, how much money can he afford to borrow?

Given an interest rate of 9.3 percent per year, what is the value at t = 6 of a perpetual stream of $1,000 annual payments that begin t =21?

Chandler Tire Co.is trying to decide which one of two projects it should accept.Both projects have the same start-up costs.Project 1 will produce annual cash flows of $52,000 a year for six years.Project 2 will produce cash flows of $48,000 a year for eight years.The company requires a 15 percent rate of return.Which project should the company select and why?

Travis borrowed $10,000 four years ago at an annual interest rate of 7 percent.The loan term is six years.Since he borrowed the money, Travis has been making annual payments of $700 to the bank.Which type of loan does he have?

Max's Kennels spent $220,000 to refurbish its current facility.The firm borrowed 60 percent of the refurbishment cost at 5.95 percent interest for six years.What is the amount of each monthly payment?

Today, you are purchasing a 15-year, 6.5 percent annuity at a cost of $36,500.The annuity will pay annual payments starting one year from today.What is the amount of each payment?

Which one of the following statements concerning annuities is correct?

Tiger Trucking Company is considering a project that will produce cash inflows of $18,000 at the end of Year 1, $32,000 in Year 2, and $45,000 in Year 3.What is the present value of these cash inflows at a discount rate of 9 percent?

Which one of the following is the annuity present value formula?

Your aunt loaned you money at 1.00 percent interest per month.What is the APR of this loan?

A local magazine is offering a $5,000 grand prize to one lucky winner.The prize will be paid in five annual payments of $1,000 each, starting one year after the drawing.How much would this prize be worth to you if you can earn 8 percent on your money?

Assume a project will produce cash flows of $22,400, $28,700, $30,300, $10,900 at the end of Years 1 to 4, respectively.If the discount rate is 14.7 percent, what is the current value of these cash flows?