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Financial Management

4

FinancialManagement

FinancialManagement

PartA

Futurevalue is calculated by the formula:

FV=PMT)

Key

FV-future value

PMT-the initial value.

r-The rate of interest or returns in percentage.

n-Is the period given per annum, quartile or semi quartile.

PV-Present Value.

1. 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

1. 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

1. 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)

1. In the case for 8%

=\${25000×(1-]/0.08)}

=\${25000×9.8181}

=\$2,454,536.85

1. 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.

1. 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+250000R-12500000000000

2617480R+=1.25e13

+R=4775585.68

R=6%