FIN202

Multiple compounding (PV): Darius Miller is seeking to accumulate $50,000 in six years to invest in a real estate venture. He can earn 6.35 percent an- nual interest with monthly compounding in a private investment. How much will he have invest today to reach his goal? (Round to the nearest dollar.)

Annuity due: Mark Holcomb has a five-year loan on which he will make an- nual payments of $2,235, beginning now. If the interest rate on the loan is 8.3 percent, what is the present value of this annuity? (Round to the nearest dollar.)

Discounted payback: Carmen Electron- ics bought new machinery for $5 million. This is expected to result in additional cash flows of $1.2 million over the next seven years. The firm's cost of capital is 12 percent. What is the discounted pay- back period for this project? If the firm's acceptance period is five years, will this project be accepted ?

You invested $3,000 in a portfolio with an expected return of 10 percent and $2000 in a portfolio with an expected return of 16%. What is the expected return of the combined portfolio?

Present value: Becky Sayers wants to buy a house in six years. She hopes to be able to put down $25,000 at that time. If the bank CD she wants to invest in will pay 7.5 percent annually, how much will she have to invest today? (Round to the nearest dollar.)

In computing the NPV of a capital bud- geting project, one should NOT