 Uncategorized
 March 28, 2020
Financial Management
4
FinancialManagement
FinancialManagement
PartA
Futurevalue is calculated by the formula:
FV=PMT_{})
Key
FVfuture value
PMTthe initial value.
rThe rate of interest or returns in percentage.
nIs the period given per annum, quartile or semi quartile.
PVPresent Value.

The future value a 6% interest rate:
FV=${(15000_{})+ (20000_{})+ (30000_{})+ (0_{})+ (0_{})+ (0_{})+ (150000(1.06))}
=22554.5+28370.4+40146.8+159000
=$250071.70

The future value at 9% interest rate:
FV=${(15000_{})+ (20000_{})+ (30000_{})+ (0_{})+ (0_{}))+ (0_{})+ (150000(1.09))}
=$(27420.6+33542.0+46158.7+163500)
=$270621.30

The future value of cash flow at 15% interest rate:
FV=${(15000_{})+ (20000_{})+ (30000_{})+ (0_{})+ (0_{})+ (0_{}))+ (150000(1.15))}
=$(39900.3+46261.2+60340.7+172500)
=$319002.20
PartB
PV=PMT([1_{}]/r)
PV=${500×([1_{}]/0.06)}
=$6,391.68
PartC
PMT=PV×R
R=PMT/PV
PV=1,850,000
N=25
PMT=150,000
Usinga PMV calculator,
R=5.56%
PartD
PV=PMT ([1_{}]/r)

In the case for 8%
=${25000×(1_{}]/0.08)}
=${25000×9.8181}
=$2,454,536.85

In the case for 5%
=${25000×(1_{}]/0.05)}
=$(25000×12.4622)
=$3,115,552.57
Iwill choose the 5% payoff rate because of it bigger net value in thelong run.

The investment rate to yield $2,867,480 from $250,000 is found by the formula below:
R=$250,000× (1 – 1/ (1+R) 20) /$2,867,480
2,867,480R=250000(_{})50000000
2867480R+_{}=250000+250000R12500000000000
2617480R+_{}=1.25e13
_{}+R=4775585.68
R=6%