Week Two Financial Exercises

Complete the Week Two Financial Exercises.*Please follow the direction on the attachment***
hcs385r3_financial_exercises_worksheet_week_2.xlsx

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Week Two Financial Exercises
Part 1
Complete the following problems using either the financial functions in Excel or the Present Value and Future Value formulas as noted below:
PV = FV * 1 / (1)^n
FV = PV * (1)^n
(1)
If you wish to have $60,000 in 8 years, how much do you need to deposit in the bank today if the account pays an interest rate of 9%?
Answer:
(2)
What will $110,000 grow to be in 9 years if it is invested today at 11%?
Answer:
(3)
(4)
You would like to have $200,000 in a college fund in 15 years. How much do you need today if you expect to earn 12% while you are investing to
pay for your child?s college?
Answer:
You have been offered $3,000 in 4 years for providing $2,000 today into a business venture with a friend. If interest rates are 10%, is this a good
investment for you?
Answer:
(5)
What will $82,000 grow to be in 11 years if it is invested today at 8% and the interest rate is compounded monthly?
Answer:
(6)
How many years will it take for $136,000 to grow to $468,000 if it is invested in an account with an annual interest rate of 8%
Answer:
(7)
At what interest rate must $112,000 be invested so that it will be worth $392,000 in 14 years?
Answer:
Week Two Financial Exercises
Part 2
Complete the following problems:
(1)
Calculate the Net Present Value (NPV) of the following cash flow stream if the required rate is 12%:
Year
Cash Flow
0
(230,000)
1
60,000
2
60,000
3
60,000
4
60,000
5
60,000
Is this a good project for the business to accept? Explain why or why not.
Answer:
(2)
Calculate the Net Present Value (NPV) of the following cash flow projections based on a required rate of 10.5%:
Year
Cash Flow
0
(120,000)
1
35,000
2
47,500
3
55,000
4
62,000
Is this a good project for the business to accept? Explain why or why not.
Answer:
(3)
A company needs to decide if it will move forward with two new products that it is evaluating. The two initiatives have the following cash
flow projections:
Project A
Year
Cash Flow
0
-800,000
1
220,000
2
265,000
3
292,000
4
317,000
Year
Cash Flow
0
-650,000
1
175,000
2
175,000
3
175,000
4
175,000
Project B
5
175,000
Based on the risk of each project, the company has a required rate of return of 11% for Project A and 11.5% for Project B. The company
has a $1.5 million budget to spend on new projects for the year. Should the company move forward with one, both, or neither of the two
new products? Show your work to support your answer.
Answer:
(4)
Calculate the internal rate of return (IRR) of the following cash flows:
Year
Cash Flow
0
(1,650,000)
1
330,000
2
365,000
3
380,000
4
415,000
5
405,000
6
370000
7
294,000
Answer:
(5)
If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below?
Year
0
1
2
3
4
5
6
Cash Flow
(274,000)
68,000
73,000
76,500
78,000
82,500
77,000
Please explain why or why not the company should move forward with this endeavor.
Answer:
(6)
Based on the investor expectations of earning at least 12%, should this projected below be completed?
Year
0
1
2
3
4
5
Cash Flow
(133,000)
37,000
42,750
44,000
46,500
82,500
Please explain why or why not the company should move forward with this endeavor.
Answer:
6
77,000

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