Detailed instructions on how to complete each question here please! Will assist

Question

Detailed instructions on how to complete each question here please! Will assist with my future midterms!

CNP, Inc. is considering a project that will produce cash inflows of $12,000 in year one, $27,600 in year two, and $48,100 in year three. What is the present value of these cash inflows if the company assigns the project a discount rate of 10.5 percent?

Select one:

a. $69,113.58

b. $64,999.91

c. $76,370.51

d. $58,372.13

e. $71,824.90

Sky Investments offers an annuity due with semi-annual payments for 10 years at 7 percent interest. The annuity costs $90,000 today. What is the amount of each annuity payment?

Select one:

a. $7,939.59

b. $6,332.50

c. $7,210.64

d. $6,118.35

e. $8,495.36

The effective annual rate is defined as the interest rate that is:

Select one:

a. equal to a monthly rate multiplied by twelve.

b. expressed as simple interest.

c. computed by multiplying the rate per period by the number of periods per year.

d. stated in terms of a rate per day.

e. expressed as if it were compounded once per year.

The future value of a series of cash flows over time can be computed by:

Select one:

a. summing the future values of each of the individual cash flows.

b. summing the amount of each of the individual cash flows and multiplying the summation by (1 + r)t, where t equals the total number of cash flows.

c. computing the future value of the middle cash flow and multiplying that amount by the number of cash flows.

d. discounting each of the individual cash flows and summing the results.

e. multiplying each individual cash flow by (1 + rt) and summing the results.

The present value of an annuity will decrease when either the:

Select one:

interest rate increases or the number of periods increases.

amount of the annuity payment decreases or the interest rate increases.

number of periods increases or the interest rate decreases.

interest rate increases or the amount of the annuity payment increases.

interest rate declines or the amount of the annuity payment increases.

Explanation / Answer

1. Calculation of Present Value Year Cash flow PVAF 10.5% Value 1 12000 0.9050 10859.73 2 27600 0.8190 22603.96 3 48100 0.7412 35649.89 NPV 69113.58 Ans. A is correct answer Ans2. Since annuity is semi annually therefore rate shall be half and time shall be double amount of each annuity= 90000/PVAF(3.5%, 20 years) 90000/14.2124 $6332.50 Ans B is correct Ans 3 E is the answer ie.expressed as if it were compounded once per year. Ans 4 A is correct ie. summing the future values of each of the individual cash flows.

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