Question

Wally, president of​ Wally's Burgers, is considering franchising. He has a potential franchise agreement that would allow him to receive 13 ​end-of-yearpayments starting one year from now. The first two payments would be $27,000 and $23,000 in one and two years​ respectively, and then $19,000 per year after that for 11 years. If Wally assumes a discount rate of 10.7%​, what is the present value of this stream of cash​ flows?

Suppose your credit card balance is $18,000. The minimum payment is $339.55. The annual interest rate is 19.3% and interest is calculated monthly. If you just make the minimum monthly payment ($339.55) every month, how much total interest will you pay by the time you pay off your debt?

Answer 1

Year	[email protected]%	CashFlow	DCF
1	0.90334	27,000.00	24,390.24
2	0.81603	23,000.00	18,768.63
3	0.73715	19,000.00	14,005.89
4	0.66590	19,000.00	12,652.11
5	0.60154	19,000.00	11,429.19
6	0.54339	19,000.00	10,324.47
7	0.49087	19,000.00	9,326.53
8	0.44342	19,000.00	8,425.05
9	0.40056	19,000.00	7,610.71
10	0.36185	19,000.00	6,875.07
11	0.32687	19,000.00	6,210.55
12	0.29528	19,000.00	5,610.25
13	0.26674	19,000.00	5,067.98
		NPV	140,696.68

Discounted CashFlow (DCF) = [email protected]% x CashFlow

The total interest that would have been paid by the time the debt is fully paid off is approximately 20,880