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8/11/2019 Solved Questions Assigned to Class From Chapter 1
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Discount rate 8%NPV 71.01 #NAME?IRR 10.56% #NAME?
Year Cash flow0 -600
1 1002 1003 1004 1005 1006 1007 1008 100
9 10010 100
Decision: The NPV > 0 and hence you should purchase the asset.Note that the IRR > discount rate, which leads to the same decision.
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Cost 10,000Payment $2,983.16 #NAME?Interest 15%
Year
Principal
at beginningof year
Payment
at end ofyear
Interest Principal
1 10,000.00 2,983.16 1,500.00 1,483.16 #NAME?2 8,516.84 2,983.16 1,277.53 1,705.633 6,811.22 2,983.16 1,021.68 1,961.474 4,849.74 2,983.16 727.46 2,255.695 2,594.05 2,983.16 389.11 2,594.056 0.00
Division of payment between:
#NA
#NAME?
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E?
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Discount rate 15%Initial payment 129.2852NPV -226.52 #NAME? Use Solver (see screen shot belo
Year Cash flow
0 -1000.001 100.00 #NAME?2 110.00 #NAME?
3 121.00 #NAME?4 133.105 146.416 161.057 177.168 194.879 214.3610 235.7911 259.37
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H I J K L
) to find the answer.
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Discount rate 20%NPV 76.71
76.71 #NAME?
Year Cash flow 0% -99.33470 -500 4% -29.4699
1 600 8% 17.720832 300 12% 48.387693 300 16% 66.97176
4 200 20% 76.706715 -1,000 24% 79.96436
28% 78.49546IRR1 6.34% #NAME? 32% 73.59927IRR2 60.20% #NAME? 36% 66.24427
40% 57.1548344% 46.87448% 35.80937
Since the NPV > 0 for interest 52% 24.26678
rates between 6.34% and 60.20%, 56% 12.47534you wouldinvest in the project 60% 0.606037if the discount rate is 20%. 64% -11.2143
68% -22.892572% -34.361
Data table
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A B C D E F G H
IRR? 10.00%
LOAN TABLE
YearCash
flowYear
Principal
at beginning
of year
Payment
at end of
year
Interest Principal
0 -800 1 800.00 300.00 80.00 220.001 300 2 580.00 200.00 58.00 142.002 200 3 438.00 150.00 43.80 106.203 150 4 331.80 122.00 33.18 88.824 122 5 242.98 133.00 24.30 108.705 133 6 134.28
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A B C D E F G H I
IRR? 3.00%
LOAN TABLE
YearCash
flowYear
Principal
at beginning
of year
Payment
at end of
year
Interest Principal
0 -800 1 800.00 300.00 24.00 276.001 300 2 524.00 200.00 15.72 184.282 200 3 339.72 150.00 10.19 139.813 150 4 199.91 122.00 6.00 116.004 122 5 83.91 133.00 2.52 130.485 133 6 -46.57
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Loan principal 100,000Term (years) 5Interest 13%
Annual payment $28,431.45 #NAME?
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Loan principal 15,000Interest rate annual 15%
monthly 1.25% #NAME?Loan term (months) 48
Monthly payment $417.46 #NAME?
Month
Principal at
beginning of
month
Payment Interest Principal
1 15,000.00 417.46 187.50 229.962 14,770.04 417.46 184.63 232.843 14,537.20 417.46 181.72 235.754 14,301.46 417.46 178.77 238.695 14,062.76 417.46 175.78 241.68
6 13,821.09 417.46 172.76 244.707 13,576.39 417.46 169.70 247.768 13,328.63 417.46 166.61 250.859 13,077.78 417.46 163.47 253.9910 12,823.79 417.46 160.30 257.1611 12,566.63 417.46 157.08 260.3812 12,306.25 417.46 153.83 263.6313 12,042.62 417.46 150.53 266.9314 11,775.69 417.46 147.20 270.2715 11,505.42 417.46 143.82 273.64
16 11,231.78 417.46 140.40 277.0617 10,954.71 417.46 136.93 280.53
18 10,674.19 417.46 133.43 284.0319 10,390.15 417.46 129.88 287.5820 10,102.57 417.46 126.28 291.1821 9,811.39 417.46 122.64 294.8222 9,516.57 417.46 118.96 298.5023 9,218.07 417.46 115.23 302.2424 8,915.83 417.46 111.45 306.0125 8,609.82 417.46 107.62 309.8426 8,299.98 417.46 103.75 313.7127 7,986.27 417.46 99.83 317.63
28 7,668.64 417.46 95.86 321.6029 7,347.03 417.46 91.84 325.6230 7,021.41 417.46 87.77 329.69
31 6,691.72 417.46 83.65 333.8132 6,357.90 417.46 79.47 337.9933 6,019.91 417.46 75.25 342.2134 5,677.70 417.46 70.97 346.4935 5,331.21 417.46 66.64 350.8236 4,980.39 417.46 62.25 355.21
37 4,625.18 417.46 57.81 359.6538 4,265.54 417.46 53.32 364.1439 3,901.39 417.46 48.77 368.69
Split of payment
between:
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40 3,532.70 417.46 44.16 373.3041 3,159.40 417.46 39.49 377.9742 2,781.43 417.46 34.77 382.69
43 2,398.74 417.46 29.98 387.4844 2,011.26 417.46 25.14 392.3245 1,618.94 417.46 20.24 397.22
46 1,221.71 417.46 15.27 402.1947 819.52 417.46 10.24 407.2248 412.31 417.46 5.15 412.3149 0.00
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PV of
remaining
payments
Same
answer
using PV$15,000.00 #NAME? $15,000.00 #NAME?$14,770.04 #NAME? $14,770.04 #NAME?$14,537.20 #NAME? $14,537.20 #NAME?$14,301.46 $14,301.46$14,062.76 $14,062.76
$13,821.09 $13,821.09$13,576.39 $13,576.39$13,328.63 $13,328.63$13,077.78 $13,077.78$12,823.79 $12,823.79
Part c of question
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Cost of car, cash 30,000
Month
Deferred payment plan 0 Cash payment 5,000 1
Monthly payment 1,050 2 Number of months 30 3
4Bank car loan rate (annual) 15% 5Bank car loan rate (monthly) 1.25% 6
79.a. Present value of deferred payment plan 31,133.35 #NAME? 8
9Dealer's monthly IRR 1.56% #NAME? 10
Annualized (in this case, multiplied by 12) 18.73% #NAME? 11121314151617181920
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E F G H
Cash payment
Payment
under
deferred
payment plan
Difference
30,000 5,000 25,000 #NAME?0 1,050 -1,050 #NAME?
0 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,050
0 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,050
0 1,050 -1,0500 1,050 -1,0500 1,050 -1,050
0 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,0500 1,050 -1,050