Exam 21: Financial Analysis

Acapella University offers to lock-in a student's tuition for a four year period.If tuition is $30,000 per year (payable at the end of each year)and the interest rate is currently 8%,what amount of money now would enable you to withdraw the $30,000 figure at the end of each of the next four years?

In the formula P = the term r is ________.

Lisa is pondering the construction and operation of a home-based cattery.She expects it will cost $35,000 to construct and will have a lifespan of four years before it collapses due to faulty construction and ammonia rot.Cash flows during those four glorious years are estimated as follows: If the interest rate is 5%,what is the present value of the cattery project?

Jake buys a new work truck every four years regardless of the condition of his current vehicle.His next truck will cost $45,000 and Jake estimates it will have a salvage value of $20,000 when it's time to buy a replacement.What is the annual depreciation?

A poultry farmer is interested in purchasing an egg tester that can measure weight,albumin height,yolk color,and Haugh units all at the touch of a button.The unit will cost $6900 and is expected to last 10 years at which point it can be sold for $500 to a farmer in a less stringently controlled egg market.What is the annual depreciation under the straight line method?

A poultry farmer is interested in purchasing an industrial egg tester that can measure weight,albumin height,yolk color,and Haugh units all at the touch of a button.The unit will cost $6900 and is expected to last 10 years at which point it can be sold for $1000 to a farmer in a less stringently controlled egg market.What is the annual depreciation for year 4 under the MACRS method? A copy of Table F.3 is appended to your exam.

Straight-line depreciation is the simplest way to calculate depreciation and usually is adequate for internal planning purposes.

The present value factors found in Table F.1 were calculated by changing the values of ________ and ________.

Nathan would have to wait until he was 35 to receive his inheritance,which was entirely too long in light of his impressive shopping list.He had almost given up hope when he saw an interesting offer one afternoon while watching television.In the advertisement,a company expressed a willingness to give him cash now if he would sign over his inheritance 11 years from now.If they use a 15% interest rate,what percentage of his inheritance will Nathan receive today?

Discounting is the process by which interest on an investment accumulates,and then earns interest itself for the remainder of the investment period.

Lisa is pondering the construction and operation of a home-based cattery.She expects it will cost $25,000 to construct and will have a lifespan of four years before it collapses due to faulty construction and ammonia rot.Cash flows during those four glorious years are estimated as follows: If the interest rate is 5%,what is the present value of the cattery project?

The ________ is the interest rate that is the lowest desired return on an investment.

It is estimated that the cost for the first year of college at Massive University,the state school with the best operations management program,will be $60,000 by the time your son is ready to enroll as a student.If prevailing interest rates will average 5 percent,what amount should you invest now to pay his first year's tuition eight years from now?

Lisa is pondering the construction and operation of a home-based cattery.She expects it will cost $15,000 to construct and will have a lifespan of four years before it collapses due to faulty construction and ammonia rot.Cash flows during those four glorious years are estimated as follows: If the interest rate is 5%,what is the present value of the cattery project?

Conhugeco is eyeing a new Plotzer 3000,which has a list price of $12,000,000.How much should they set aside today if they want to make their purchase one year from now and their interest-bearing checking account pays 3% annually?