Financial Analysis

Financial Analysis

Problem 1

The Engineering Economics Finance Company (EEFC ) plans to receive 990 ,000 next year from a certain investment , with increases of 5 per year . If N 4 years and the interest rate is 10 , determine the present worth of the cash flows . Show calculations

At the end of 1st year 990 ,000

At the end of 2nd year 990 ,000 1 .05 1 ,039 ,500

At the end of 3rd year 1 ,039 ,500 1 .05 1 ,091 ,475

At the end of 4th year 1 ,091 ,475 1

.05 1 ,146 ,049

Present worth of cash flows

Yr 1 990 ,000 ___1___ 990 ,000 ___1___ 990 ,000 0 .909 899 ,910 (1 10 )1 1 .10

Yr 2 990 ,000 ___1___ 990 ,000 ___1___ 990 ,000 0 .826 858 ,627 (1 10 )2 1 .10

Yr 3 990 ,000 ___1___ 990 ,000 ___1___ 990 ,000 0 .751 819 ,697 (1 10 )3 1 .33

Yr 4 990 ,000 ___1___ 990 ,000 ___1___ 990 ,000 0 .683 782 ,751 (1 10 )4 1 .46 Problem 2

Your grandmother bought an annuity from Rock Solid Life Insurance Company for 200 ,000 when she retired . In exchange for 200 ,000 , Rock Solid will pay her 25 ,000 per year until she dies . The interest rate is 5 . How long must she live after the day she retired to come out ahead (that is to get more in value than she paid in

Year Amt Paid Monthly Interest Paid Interest...