18. (3 points) Sandy, a manufacturer engineer, just received a year-end bonus of

Question

18. (3 points) Sandy, a manufacturer engineer, just received a year-end bonus of $10,000 that will be invested immediately With the expectation of earning at the rate of 8% per year Sandy hopes to take the entire amount out in exactly 20 years to pay for a family vacation when the oldest daughter is due to graduate from college. Find the amount of funds that will be available in 20 years (show your equations/calculations) 19. (3 points) Given the cash flow in the table below, what is the internal rate of return? (Use MS Excel to solve this problem and your answer should have four decimals (i.e 15.4639% or 0.154639) (The table contents can copied and pasted in to Excel.) Month Cash Flo 9260 1410 1440 1329 86 156 1525 603 61 1368 891 1228 881 150 10 792 145

Explanation / Answer

18. amount of funds that will be available after 20 years

= Principal amount x ( 1 + Interest rate/100)^20

= $10,000 x 1.08^20

= $10,000 x 4.660957

= $46609.57

19. The values of cash flow for 16 months are placed in excel .

Subsequently , we apply the formula IRR ( ) in excel to obtain the value of internal rate of return .

Accordingly ,derived value of Internal rate of return = 9.82 %

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