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 10-year 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 never-ending 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 full-time 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