Present values A factory costs $800,000. You reckon that it will produce an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what is the net present value of the factory? What will the factory be worth at the end of five years?
15.
Present values A machine costs $380,000 and is expected to produce the following cash flows:
If the cost of capital is 12%, what is the machine's NPV?
16.
Growing annuities Mike Polanski is 30 years of age and his salary next year will be $40,000. Mike forecasts that his salary will increase at a steady rate of 5% per annum until his retirement at age 60.
If the discount rate is 8%, what is the PV of these future salary payments?
If Mike saves 5% of his salary each year and invests these savings at an interest rate of 8%, how much will he have saved by age 60?
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If Mike plans to spend these savings in even amounts over the subsequent 20 years, how much can he spend each year?
