Question

Penny bought a new truck today from Middlefield Motors. She will receive a cash rebate of 4,100 dollars from Middlefield Motors today, pay 27,600 dollars to Middlefield Motors in 1 year(s), receive a cash rebate of 5,500 dollars from Middlefield Motors in 4 year(s), and pay 25,600 dollars to Middlefield Motors in 7 year(s). If the discount rate is 12.39 percent, then what is the present value of the cash flows associated with this transaction? Note: the correct answer is less than zero.

Preeti has an investment that is worth 59,700 dollars and has an expected return of 6.49 percent. The investment is expected to pay her 26,600 dollars in 7 year(s) from today and X dollars in 6 year(s) from today. What is X?

Red Royal Health just bought a new dry cleaner. To pay for the dry cleaner, the company took out a loan that requires Red Royal Health to pay the bank a special payment of 5,700 dollars in 5 month(s) and also pay the bank regular payments of 1,990 dollars each month forever. The interest rate on the loan is 1.71 percent per month and the first monthly payment of 1,990 dollars will be paid in 1 month. What was the price of the dry cleaner?

Answer 1

25600 4100 -27600 4100 -24557 0 0 3447 00 11302 5500 3 IPV @ 12.39% 5 NPV 28312 59700 6.49% 8 Expected returi 17,128.52 42,571.48 10 PV 11 Balance 12 13 X 14 15 16 17 Price of dry cleaner is equal to present value of payments 18 19 20 21 62,082.86 5236.69 116374.27 121610.96

4100 27600 -c2/1 +12.39%)"C1 5500 25600 3 IPV @ 12.39% -62/(1 +12.39%)ABI SUM(B3:13) 59700 =D2/1 +12-E2/1 +12-F2/1 +12.39%rFsG2/(1+12-H2/(1+12-12/(1+12.39%)시1 5 NPV 8 Expected return 0.0649 10 PV 11 Balance 12 13 X -26600(1+SBS8H7 -B7-B10 --FV(B8,6,0,B11) 15 16 17 Price of dry cleaner is equal to 18 19-6700/(1+1.71 % 20-1990/1.71% 21 SUM(A19:A20)