Financial Math Answers

A company is planning to make an investment of $100,000 in a Machine. The company’s analyst had estimated that the useful life of the Machine is 5 years and that each year (from Year 1 to Year 5), the company will receive a net income of $35,000 from this investment. The acceptable cost of capital is assumed to be 10% p.a. Calculate:
(a) The payback period of this project/investment plan. [5 marks]
(b) The net present value (NPV) of this project/investment plan. [10 marks] (c) The internal rate of return (IRR) of this project/investment plan. [15 marks]
(d) Analyze the different results from (a)-(c) and make a proposal whether the company should proceed with this project. [5 marks]
(e) Determine the IRR that will reverse the decision you proposed in (d)
[15 marks]

A company is planning to make an investment of $100,000 in a Machine. The
company’s analyst had estimated that the useful life of the Machine is 5 years and
that each year (from Year 1 to Year 5), the company will receive a net income of
$35,000 from this investment. The acceptable cost of capital is assumed to be 10%
p.a. Calculate:
a)The net present value (NPV) of this project/investment plan.
b)The internal rate of return (IRR) of this project/investment plan

A company is planning to make an investment of $100,000 in a Machine. The
company’s analyst had estimated that the useful life of the Machine is 5 years and
that each year (from Year 1 to Year 5), the company will receive a net income of
$35,000 from this investment. The acceptable cost of capital is assumed to be 10%
p.a. Calculate:
(a) The payback period of this project/investment plan?

Shoe Company orders men’s shoes at a buyer’s meeting in New York City. Because the shoe is designed for spring and summer months, it cannot be expected to sell in the fall. Johnson plans to hold a special August clearance sale in an attempt to sell all shoes not sold by July 31. The shoes cost $40 a pair and retail for $60 a pair. At the sale price of $30 a pair, all surplus shoes can be expected to sell during the August sale. If you were the buyer for the Johnson Shoe Company, how many pairs of the shoe would you order? Assume that the demand for these shoes are normally distributed with a mean of 500 and a standard deviation of 20.

An immediate annuity has 40 initial quarterly payments of 20 followed by a perpetuity of quarterly payments of 30 starting in the eleventh year. Find the present value at 5% convertible quarterly.

You deposit 500 in an account today and an additional amount X in one year. The account pays 3.5% annually. What amount X is required to have 2000 in the account at the end of three years?

Bonnie claims single with 2 federal withholding allowances, and contributes state tax of 20% of her federal tax. Below is a copy of Bonnie's biweekly statement of earnings. Bonnie knows that her gross earnings and federal tax are correct, but she thinks that her net pay is not correct.


Earnings
Deductions

Week Ended
Regular
FED. SOC. MED STATE
WITH. WITH. CARE. WITH.
NET PAY
4/15
$760.00
$50.00 $47.12 $110.20 $10.00
$542.68

Using the fact that Social Security is 6.2% and Medicare is 1.45% of gross pay, explain why the given net pay is not correct. Determine how the error can be corrected, and what the net pay should be.

Having earned a bonus at his​ work, Rick placed the money in an investment earning
6.86% compounded monthly. He withdrew ​$370 at the end of every month for the next
4 years.
​(a) What was the amount of the​ bonus?
​(b) If he made all of the withdrawals as​ planned, how much interest was​ paid?

At age 21 Julio begins saving ​$1 comma 250

each year until age 35 ​(15

​payments) in an ordinary annuity paying 5.7
​%
annual interest compounded yearly and then leaves his money in the account until age 65​ (30 years). His friend Max begins at age 41 saving ​$2 comma 500

per year in the same type of account until age 65​ (25 payments). How much does each have in his account at age​ 65?

What is the present value of a single cash flow of $25,000 received at the end of 10 years, if we assume a discount rate of 5% annually? With a discount rate of 7%