finance data bank
58. The Wine Press is considering a project which has
an initial cash requirement of $187,400. The project will yield cash flows of
$2,832 monthly for 84 months. What is the rate of return on this project?
A. 6.97 percent
B. 7.04 percent
C. 7.28 percent
D. 7.41 percent
E. 7.56 percent
59. Your insurance agent is trying to sell you an
annuity that costs $200,000 today. By buying this annuity, your agent promises
that you will receive payments of $1,225 a month for the next 30 years. What is
the rate of return on this investment?
A. 5.75 percent
B. 5.97 percent
C. 6.20 percent
D. 6.45 percent
E. 6.67 percent
60. You have been investing $250 a month for the last
13 years. Today, your investment account is worth $73,262. What is your average
rate of return on your investments?
A. 8.94 percent
B. 9.23 percent
C. 9.36 percent
D. 9.41 percent
E. 9.78 percent
61. Will has been purchasing $25,000 worth of New Tek
stock annually for the past 11 years. His holdings are now worth $598,100. What
is his annual rate of return on this stock?
A. 14.13 percent
B. 14.24 percent
C. 14.29 percent
D. 14.37 percent
E. 14.68 percent
62. Your father helped you start saving $20 a month
beginning on your 5th birthday. He always made you deposit the money into your
savings account on the first day of each month just to "start the month
out right." Today completes your 17th year of saving and you now have
$6,528.91 in this account. What is the rate of return on your savings?
A. 5.15 percent
B. 5.30 percent
C. 5.47 percent
D. 5.98 percent
E. 6.12 percent
63. Today, you turn 23. Your birthday wish is that you
will be a millionaire by your 40^{th} birthday. In an attempt to reach
this goal, you decide to save $50 a day, every day until you turn 40. You open
an investment account and deposit your first $50 today. What rate of return
must you earn to achieve your goal?
A. 10.67 percent
B. 11.85 percent
C. 12.90 percent
D. 13.06 percent
E. 13.54 percent
64. You just settled an insurance claim. The
settlement calls for increasing payments over a 10year period. The first
payment will be paid one year from now in the amount of $10,000. The following
payments will increase by 4.5 percent annually. What is the value of this
settlement to you today if you can earn 8 percent on your investments?
A. $76,408.28
B. $80,192.76
C. $82,023.05
D. $84,141.14
E. $85,008.16
65. Your grandfather left you an inheritance that will
provide an annual income for the next 10 years. You will receive the first
payment one year from now in the amount of $4,000. Every year after that, the
payment amount will increase by 6 percent. What is your inheritance worth to
you today if you can earn 9.5 percent on your investments?
A. $31,699.15
B. $36,666.67
C. $41,121.21
D. $43,464.12
E. $46,908.17
66. You just won a national sweepstakes! For your
prize, you opted to receive neverending payments. The first payment will be
$12,500 and will be paid one year from today. Every year thereafter, the
payments will increase by 3.5 percent annually. What is the present value of
your prize at a discount rate of 8 percent?
A. $166,666.67
B. $248,409.19
C. $277,777.78
D. $291,006.12
E. $300,000.00
67. A wealthy benefactor just donated some money to
the local college. This gift was established to provide scholarships for worthy
students. The first scholarships will be granted one year from now for a total
of $35,000. Annually thereafter, the scholarship amount will be increased by
5.5 percent to help offset the effects of inflation. The scholarship fund will
last indefinitely. What is the value of this gift today at a discount rate of 8
percent?
A. $437,500
B. $750,000
C. $1,200,000
D. $1,400,000
E. $1,450,750
68. Southern Tours is considering acquiring Holiday
Vacations. Management believes Holiday Vacations can generate cash flows of
$187,000, $220,000, and $245,000 over the next three years, respectively. After
that time, they feel the business will be worthless. Southern Tours has
determined that a 13.5 percent rate of return is applicable to this potential
acquisition. What is Southern Tours willing to pay today to acquire Holiday
Vacations?
A. $503,098
B. $538,615
C. $545,920
D. $601,226
E. $638,407
69. You are considering two savings options. Both
options offer a 7.4 percent rate of return. The first option is to save $900,
$2,100, and $3,000 at the end of each year for the next three years,
respectively. The other option is to save one lump sum amount today. If you
want to have the same balance in your savings account at the end of the three
years, regardless of the savings method you select, how much do you need to
save today if you select the lump sum option?
A. $4,410
B. $4,530
C. $4,600
D. $5,080
E. $5,260
70. Your parents have made you two offers. The first
offer includes annual gifts of $10,000, $11,000, and $12,000 at the end of each
of the next three years, respectively. The other offer is the payment of one
lump sum amount today. You are trying to decide which offer to accept given the
fact that your discount rate is 8 percent. What is the minimum amount that you
will accept today if you are to select the lump sum offer?
A. $28,216
B. $29,407
C. $29,367
D. $30,439
E. $30,691
71. You are considering changing jobs. Your goal is to
work for three years and then return to school fulltime in pursuit of an
advanced degree. A potential employer just offered you an annual salary of
$41,000, $44,000, and $46,000 a year for the next three years, respectively.
All salary payments are made as lump sum payments at the end of each year. The
offer also includes a starting bonus of $2,500 payable immediately. What is this
offer worth to you today at a discount rate of 6.75 percent?
A. $112,406
B. $115,545
C. $117,333
D. $121,212
E. $134,697
72. You are considering a project which will provide
annual cash inflows of $4,500, $5,700, and $8,000 at the end of each year for
the next three years, respectively. What is the present value of these cash
flows, given a 9 percent discount rate?
A. $14,877
B. $15,103
C. $15,429
D. $16,388
E. $16,847
73. You just signed a consulting contract that will
pay you $35,000, $52,000, and $80,000 annually at the end of the next three
years, respectively. What is the present value of these cash flows given a 10.5
percent discount rate?
A. $133,554
B. $142,307
C. $148,880
D. $151,131
E. $156,910
74. You have some property for sale and have received
two offers. The first offer is for $89,500 today in cash. The second offer is
the payment of $35,000 today and an additional $70,000 two years from today. If
the applicable discount rate is 11.5 percent, which offer should you accept and
why?
A. You should accept the $89,500 today because it has the higher net
present value.
B. You should accept the $89,500 today because it has the lower future
value.
C. You should accept the first offer as it has the greatest value to you.
D. You should accept the second offer because it has the larger net
present value.
E. It does not matter which offer you accept as they are equally valuable.
75. Your local travel agent is advertising an upscale
winter vacation package for travel three years from now to Antarctica. The
package requires that you pay $25,000 today, $30,000 one year from today, and a
final payment of $45,000 on the day you depart three years from today. What is
the cost of this vacation in today's dollars if the discount rate is 9.75 percent?
A. $86,376
B. $89,695
C. $91,219
D. $91,407
E. $93,478
76. One year ago, Deltona Motor Parts deposited
$16,500 in an investment account for the purpose of buying new equipment three
years from today. Today, it is adding another $12,000 to this account. The
company plans on making a final deposit of $20,000 to the account one year from
today. How much will be available when it is ready to buy the equipment,
assuming the account pays 5.5 interest?
A. $53,408
B. $53,919
C. $56,211
D. $56,792
E. $58,021
77. Lucas will receive $6,800, $8,700, and $12,500
each year starting at the end of year one. What is the future value of these
cash flows at the end of year five if the interest rate is 7 percent?
A. $32,418
B. $32,907
C. $33,883
D. $35,411
E. $36,255
78. You plan on saving $5,200 this year, nothing next
year, and $7,500 the following year. You will deposit these amounts into your
investment account at the end of each year. What will your investment account
be worth at the end of year three if you can earn 8.5 percent on your
funds?
A. $13,528.12
B. $13,621.57
C. $13,907.11
D. $14,526.50
E. $14,779.40
79. Miley expects to receive the following payments:
Year 1 = $60,000; Year 2 = $35,000; Year 3 = $12,000. All of this money will be
saved for her retirement. If she can earn an average of 10.5 percent on her
investments, how much will she have in her account 25 years after making her
first deposit?
A. $972,373
B. $989,457
C. $1,006,311
D. $1,147,509
E. $1,231,776
80. Blackwell, Inc. has a $75,000 liability it must
pay three years from today. The company is opening a savings account so that
the entire amount will be available when this debt needs to be paid. The plan
is to make an initial deposit today and then deposit an additional $15,000 each
year for the next three years, starting one year from today. The account pays a
4.5 percent rate of return. How much does the firm need to deposit today?
A. $18,299.95
B. $20,072.91
C. $21,400.33
D. $24,487.78
E. $31,076.56
81. The government has imposed a fine on the Corner
Tavern. The fine calls for annual payments of $150,000, $100,000, $75,000, and
$50,000, respectively, over the next four years. The first payment is due one
year from today. The government plans to invest the funds until the final
payment is collected and then donate the entire amount, including the
investment earnings, to help the local community shelter. The government will
earn 6.25 percent on the funds held. How much will the community shelter
receive four years from today?
A. $349,674.06
B. $366,875.00
C. $422,497.56
D. $458,572.71
E. $515,737.67
82. Wicker Imports established a trust fund that
provides $90,000 in scholarships each year for needy students. The trust fund
earns a fixed 6 percent rate of return. How much money did the firm contribute
to the fund assuming that only the interest income is distributed?
A. $1,150,000
B. $1,200,000
C. $1,333,333
D. $1,500,000
E. $1,600,000
83. A preferred stock pays an annual dividend of
$2.60. What is one share of this stock worth today if the rate of return is
11.75 percent?
A. $18.48
B. $20.00
C. $22.13
D. $28.80
E. $30.55
84. You would like to establish a trust fund that will
provide $120,000 a year forever for your heirs. The trust fund is going to be
invested very conservatively so the expected rate of return is only 5.75
percent. How much money must you deposit today to fund this gift for your
heirs?
A. $2,086,957
B. $2,121,212
C. $2,300,000
D. $2,458,122
E. $2,500,000
85. You just paid $750,000 for an annuity that will
pay you and your heirs $45,000 a year forever. What rate of return are you
earning on this policy?
A. 5.25 percent
B. 5.50 percent
C. 5.75 percent
D. 6.00 percent
E. 6.25 percent

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Solution: finance data bank