investment ideas
SuperClassBelow are two investment ideas to work with:
Use straight-line amortization in all calculations and exclude income taxes.
IDEA ONE | IDEA TWO | |
Initial capital investment | $120,000 | $180,000 |
Estimated useful life | 3 years | 3 years |
Estimated terminal salvage value | 0 | 0 |
Estimated annual savings in cash operating costs | $50,000 | $80,000 |
Minimum desired rate of return | 10 % | 12 % |
Present Value of $1 (3 years) | Present Value of an Annuity of $1 (3 years) | |
8% | 0.7938 | 2.5771 |
10% | 0.7513 | 2.4869 |
12% | 0.7118 | 2.4018 |
14% | 0.6750 | 2.3216 |
16% | 0.6407 | 2.2459 |
The net present value in IDEA ONE is
A) $4,345
B) $82,435
C) $50,000
D) $90
The net present value in IDEA TWO is
A) $80,000
B) $12,144
C) $-328 (negative amount)
D) $123,056
3. Using the Present Value table above, calculate the present value of 5-year annuity of $10,000 and an annual earning return of 8%.
A) $31,700
B) $34,700
C) $37,910
D) $39,930
10 years ago
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investment_ideas.docx
