Discounted Cash Flow Valuations and Net Present Value 1. ?You are offered three annuities (these make equal payments over a
Discounted Cash Flow Valuations and Net Present Value
1. You are offered three annuities (these make equal payments over a specific period). Using an annual 3.5% discount rate, calculate each annuity's price:
#
price
Payments ($/month)
Life (yrs.)
1
?
95
4
2
?
100 (growing @1.5%/yr.)
4
3
?
55 (growing @1.5%/yr.)
Forever
2. You purchase a machine. It costs $75,000 and will expand cash flow by $1,000 /month in year 1 growing by 2% per year after that. The system will work for 10 years before you have to replace it. What are the NPV (at a 3.3% discount rate) and IRR? The vendor offers you another machine costing $100,000 and lasting 12 years, with the same cash flow gains and a 3% growth rate. What are the NPV and the IRR for it? Should you get it?
3. Read Why the Mets Pay Bobby Bonilla $1.19 Million Every July 1
a. Use July 1, 2011, to calculate the future value of the $5.9M owed on July 1, 2000
b. Use July 1, 2011, to calculate the present value of the 25 yearly payments of $1,193,248.20. The first payment is made on July 1, 2011
c. Should Bobby take it? Why?
4. You are looking to lease a car and the dealer offers you: Car price = $30,000 Monthly payments = $499 Down payment = $2,000 Lease term = 48 months Purchase price at end of lease = $12,000 What is the implicit interest rate on the lease?
5. The Airbus A220 has the following R&D costs (all negative cash flows):
€600M (year 1) €500M (year 2) €400M (year 3)
Each plane will be sold for €50M – 25% down and the rest due on delivery one year later. The cost to produce each plane is €44M – these costs are recognized on delivery. Sales says that you will sell 30 planes (year 4), growing by 15 planes per year. The last sale is made in year 12, when it is replaced by a new model. What are the NPV (as of the beginning of year 1) and the IRR of the plane using a 9% discount rate?
Prob. 1
Annuity | |||
1 | 2 | 3 | |
Payments | |||
Discount rate | |||
Growth rate | |||
Price to be paid | |||
Cash Flows: | |||
1 | |||
2 | |||
3 | |||
4 | |||
5 | |||
6 | |||
7 | |||
8 | |||
9 | |||
10 | |||
11 | |||
12 | |||
13 | |||
14 | |||
15 | |||
16 | |||
17 | |||
18 | |||
19 | |||
20 | |||
21 | |||
22 | |||
23 | |||
24 | |||
25 | |||
26 | |||
27 | |||
28 | |||
29 | |||
30 | |||
31 | |||
32 | |||
33 | |||
34 | |||
35 | |||
36 | |||
37 | |||
38 | |||
39 | |||
40 | |||
41 | |||
42 | |||
43 | |||
44 | |||
45 | |||
46 | |||
47 | |||
48 |
Prob. 2
Machine 1 | Machine 2 | |
Discount rate | ||
Growth rate | ||
NPV | ||
IRR | ||
Cash flows: | ||
Start | ||
Month 1 | ||
Month 2 | ||
Month 3 | ||
Month 4 | ||
Month 5 | ||
Month 6 | ||
Month 7 | ||
Month 8 | ||
Month 9 | ||
Month 10 | ||
Month 11 | ||
Month 12 | ||
Month 13 | ||
Month 14 | ||
Month 15 | ||
Month 16 | ||
Month 17 | ||
Month 18 | ||
Month 19 | ||
Month 20 | ||
Month 21 | ||
Month 22 | ||
Month 23 | ||
Month 24 | ||
Month 25 | ||
Month 26 | ||
Month 27 | ||
Month 28 | ||
Month 29 | ||
Month 30 | ||
Month 31 | ||
Month 32 | ||
Month 33 | ||
Month 34 | ||
Month 35 | ||
Month 36 | ||
Month 37 | ||
Month 38 | ||
Month 39 | ||
Month 40 | ||
Month 41 | ||
Month 42 | ||
Month 43 | ||
Month 44 | ||
Month 45 | ||
Month 46 | ||
Month 47 | ||
Month 48 | ||
Month 49 | ||
Month 50 | ||
Month 51 | ||
Month 52 | ||
Month 53 | ||
Month 54 | ||
Month 55 | ||
Month 56 | ||
Month 57 | ||
Month 58 | ||
Month 59 | ||
Month 60 | ||
Month 61 | ||
Month 62 | ||
Month 63 | ||
Month 64 | ||
Month 65 | ||
Month 66 | ||
Month 67 | ||
Month 68 | ||
Month 69 | ||
Month 70 | ||
Month 71 | ||
Month 72 | ||
Month 73 | ||
Month 74 | ||
Month 75 | ||
Month 76 | ||
Month 77 | ||
Month 78 | ||
Month 79 | ||
Month 80 | ||
Month 81 | ||
Month 82 | ||
Month 83 | ||
Month 84 | ||
Month 85 | ||
Month 86 | ||
Month 87 | ||
Month 88 | ||
Month 89 | ||
Month 90 | ||
Month 91 | ||
Month 92 | ||
Month 93 | ||
Month 94 | ||
Month 95 | ||
Month 96 | ||
Month 97 | ||
Month 98 | ||
Month 99 | ||
Month 100 | ||
Month 101 | ||
Month 102 | ||
Month 103 | ||
Month 104 | ||
Month 105 | ||
Month 106 | ||
Month 107 | ||
Month 108 | ||
Month 109 | ||
Month 110 | ||
Month 111 | ||
Month 112 | ||
Month 113 | ||
Month 114 | ||
Month 115 | ||
Month 116 | ||
Month 117 | ||
Month 118 | ||
Month 119 | ||
Month 120 | ||
Month 121 | ||
Month 122 | ||
Month 123 | ||
Month 124 | ||
Month 125 | ||
Month 126 | ||
Month 127 | ||
Month 128 | ||
Month 129 | ||
Month 130 | ||
Month 131 | ||
Month 132 | ||
Month 133 | ||
Month 134 | ||
Month 135 | ||
Month 136 | ||
Month 137 | ||
Month 138 | ||
Month 139 | ||
Month 140 | ||
Month 141 | ||
Month 142 | ||
Month 143 | ||
Month 144 |
Prob. 3
July 2000 pay due | |||
Interest rate | |||
Future value of July 2000 pay on July 1, 2011 | Enter text answer in the box below: | ||
Present value of 25 yearly payments | |||
Year 1 | |||
Year 2 | |||
Year 3 | |||
Year 4 | |||
Year 5 | |||
Year 6 | |||
Year 7 | |||
Year 8 | |||
Year 9 | |||
Year 10 | |||
Year 11 | |||
Year 12 | |||
Year 13 | |||
Year 14 | |||
Year 15 | |||
Year 16 | |||
Year 17 | |||
Year 18 | |||
Year 19 | |||
Year 20 | |||
Year 21 | |||
Year 22 | |||
Year 23 | |||
Year 24 | |||
Year 25 |
Prob. 4
Lease | |
Implicit lease rate | |
Cash flows: | |
Start | |
Month 1 | |
Month 2 | |
Month 3 | |
Month 4 | |
Month 5 | |
Month 6 | |
Month 7 | |
Month 8 | |
Month 9 | |
Month 10 | |
Month 11 | |
Month 12 | |
Month 13 | |
Month 14 | |
Month 15 | |
Month 16 | |
Month 17 | |
Month 18 | |
Month 19 | |
Month 20 | |
Month 21 | |
Month 22 | |
Month 23 | |
Month 24 | |
Month 25 | |
Month 26 | |
Month 27 | |
Month 28 | |
Month 29 | |
Month 30 | |
Month 31 | |
Month 32 | |
Month 33 | |
Month 34 | |
Month 35 | |
Month 36 | |
Month 37 | |
Month 38 | |
Month 39 | |
Month 40 | |
Month 41 | |
Month 42 | |
Month 43 | |
Month 44 | |
Month 45 | |
Month 46 | |
Month 47 | |
Month 48 |
Prob. 5
Sale price (M euros)/plane | |||||||||||||
Down payment (%) | |||||||||||||
Cost per plane (M euros) | |||||||||||||
Discount rate | |||||||||||||
Years | |||||||||||||
(in Million euros) | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 |
# of planes sold | |||||||||||||
Investments on R&D | |||||||||||||
Revenues | |||||||||||||
Production Costs | |||||||||||||
Cash Flows | |||||||||||||
NPV | |||||||||||||
IRR |
v. JAN '22
No content – Intentionally left blank |
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.