1. Find the future value of an investment of $2,500 made today at 7.63 percent compounded quarterly for 6 years.

2. You have just inherited $550,000. You plan to save this money and continue to live off the money that you are earning in your current job. If the $550,000 is everything that you have other than an old car and some beat-up furniture, and you can invest the money in a bond that pays 4.6 percent interest annually. How long will it be before you are a millionaire?

3. Infosys Technologies, Inc., an Indian technology company reported net income of $419 million this year. Analysts expect the company’s earnings to be $1.468 billion in five years. What is the expected growth rate in the company’s earnings (in percent)?

4. Tracy Chapman is saving to buy a house in five years time. She plans to put down 20 percent down at that time, and she believes that she will need $35,000 for the down payment. If Tracy can invest in a fund that pays 9.25 percent annually, how much will she need to invest today?

5. There is an investment that will pay the following cash flows over the next five years: $2,350, $2,725, $3,128, $3,366, and $3,695. If typical investments earn 7.65 percent, what is the future value of the investment’s cash flows at the end of five years?

6. Gary currently has $7,500 in a savings account that pays 5.65 percent annually. Gary plans to use his current savings plus what he can save over the next four years to buy a car. He estimates that the car will cost $12,000 in four years. How much money should Gary save each year if he wants to buy the car?

7. A Lottery winner chooses to receive a yearly distibution of her winnings in stead of a lump sum payout. She will receive a payment of $89,729.45 every year, starting today, for the next 20 years. Assume the cost of capital is 7.25 percent. If she had chosen to receive a lump sum payment immediatly, how much would she have received?

8. You are evaluating a growing perpetuity product from a large financial services firm. The investment promises an initial payment of $20,000 at the end of this year and subsequent payments which will grow at a rate of 3.4 percent annually. If you use a 9 percent discount rate for investment like this, what is the present value of this growing perpetuity?

9. Given the following cash flows for a capital budgeting project, calculate the NPV and IRR. The required rate of return is 8 percent.
Year                0                1          2             3          4             5
Cash Flow    -$50,000 $15,000    $15,000 $20,000 $10,000 $5,000

Choose the correct answer:
   NPV          IRR
a. $1,905       10.9%
b. $1,905          26.0%
c. $3,379          10.9%
d. $3,379          26.0%

10. Given the following cash flows for a capital budgeting project, calculate the payback period and the discounted payback period. The required rate of return is 8 percent.
Year                   0                1                2                3                4       5
Cash Flow    -$50,000    $15,000    $15,000    $20,000    $10,000 $5,000
The discounted payback period is
a. 0.16 year longer than the payback period.
b. 0.80 year longer than the payback period.
c. 1.01 years longer than the payback period.
d. 1.85 years longer than the payback period.

11. An investment of $100 generates after-tax cash flows of $40 in Year 1, $80 in Year 2, and $120 in Year 3. The required rate of return is 20 percent. The net present value is closest to:
a. $42.22
b. $58.33
c. $68.52
d. $98.95

12. An investment of $150,000 is expected to generate an after-tax cash flow of $100,000 in one year and another $120,000 in two years. The cost of capital is 10 percent. What is the internal rate of return?
a. 28.19 percent
b. 28.39 percent
c. 28.59 percent
d. 28.79 percent

13. An investment requires an outlay of $100 and produces after-tax cash flows of $40 annually for four years. A project enhancement increases required outlay by $15 and the annual after-tax cash flows by $5. How will the enhancement affect the project's NPV profile? The vertical intercept of the NPV profile of the project shifts:
a. up and the horizontal intercept shifts left.
b. up and the horizontal intercept shifts right.
c. down and the horizontal intercept shifts left.
d. down and the horizontal intercept shifts right.

1. Find the future value of an investment of $2,500 made today at 7...