Question

12. Calculate the payment to be received at the beginning of each month for 15 years from an investment of $250,000.00 earning 14.4%, compounded monthly.

13. Calculate the monthly payment for a home loan of $100,000 financed at 7% over 30 years.

14. Calculate the monthly payment for a home loan of $150,000 financed at 6 ¾% over 15 years.

15. Calculate the NPV of a machine which is bought for $5,000.00, sold at the end of year 5 for $2,500.00, and produces the following cash flows: year 1) +$700; year 2) +$600; year 3) +$500; year 4) +$400; year 5) +300, assume the cost of capital is 10%.

16. Calculate the NPV of a machine which is bought for $10,000.00, sold at the end of year 5 for $3,500.00, and produces the following cash flows: year 1) +$300; year 2) +$600; year 3) +$1,200; year 4) +$2,400; year 5) +$4,800, assume the cost of capital is 12%.

Answer 1

12.

Present value (PV) = $ 250000

Annual interest rate = 14.4%

No. of years = 15 years

No. of months (n) = 15 years x 12 months = 180

Solution :-

monthly Interest rate (8) - Annual Interest rate - 12 months 14.4% 12 – 1.2% of 0.012 Let the monthly payment to be received at the beginning of each month to be M', due pv of annuny - M [ 1 - 1 tsin (178) $250000 - model 1 ( 26.013189)(1+0.012) $250000 XC.OR= M [ - 0.013180) (1.017) $3000 = M11-2560364369) (1.017) &3000 1.012 - M17.560364369 18.5603 64369]

$2964.42687747= M17.560364369 (8.560364369 ) - M $3964.687797 x 8 S60 364364 7.560364369 $ 3356.53 = M. Thas, the payment to be deceived at the beginning of each month is $ 3356.53