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Compounding intervals: Evaluate the following investments. For each, calculate the effective annual interest rates and...

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Finance

  1. Compounding intervals: Evaluate the following investments. For each, calculate the effective annual interest rates and the FV of $1 invested in each after five years.

    1. An investment with APR = 11% compounded annually.

    2. An investment with APR = 10.7% compounded semi-annually (i.e., twice annually).

    3. An investment with APR = 10.5% compounded continuously.

  2. Perpetuities & Annuities:

    1. What is the PV of an asset that pays $10 forever? Assume r = 9%.

    2. How large would the annual payout have to be for 10-year annuity to be worth more than

      the answer to (a)? (You may assume that r is the same.)

    3. An investment costs $1200 down, but will pay $140 in perpetuity. What is the NPV if r =

      10%?

    4. What is the r where NPV = $0?

  3. It will cost you $840,000 to buy a factory. Your research shows that it will payoff $210,000 at the end of each year for 10 years. You are a smart person so your opportunity cost of capital is 14%.

    What is the NPV of the factory?

    What could you sell the factory for after 5 years?

DONT DO THEM IN EXCEL PLEASE. I NEED FORMULAS

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