# FINE 332 Corporate Finance

## FINE 332 Corporate Finance

FINE 332 Module 2 Problem Set Discounted Cash Flow Valuations and Net Present Value

1. You are offered three annuities (these make equal payments over a specific period). Using an annual

4.2% discount rate, calculate each annuity’s price:

# Price (\$) Payments (\$/year) Life (yrs.) 1 ? 195 10 2 ? 200 (growing @1%/yr.) 10 3 ? 49 (growing @1%/yr.) Forever

2. You need to purchase a machine. It costs \$75,000 and will expand cash flow by \$10,000/year in year 1,

growing by 2.3% per year after that. The system will work for 10 years before you have to replace it. What are the NPV (at a 4.2% discount rate) and IRR? The vendor offers you another machine costing \$120,000 and lasting 15 years, with the same starting cash flow and a 2.5% growth rate. What are the NPV and the IRR for it? Which machine should you purchase?

3. Read Why the Mets Pay Bobby Bonilla \$1.19 Million Every July 1

a. Use July 1, 2011, to calculate the future value of the \$5.9M owed on July 1, 2000 b. Use July 1, 2011, to calculate the present value of the 25 yearly payments of

\$1,193,248.20. The first payment is made on July 1, 2011 c. Should Bobby take it? Why?

4. You are looking to lease a car and the dealer offers you:

Car price = \$36,000 Monthly payments = \$699 Down payment = \$1,000 Lease term = 36 months Purchase price at end of lease = \$18,000 What is the implicit interest rate on the lease?

5. The Airbus A220 has the following R&D costs (all negative cash flows):

€300M (year 1) €200M (year 2) €100M (year 3)

Each plane will be sold for €45M – 20% down and the rest due on delivery one year later. The cost to produce each plane is €35M – these costs are recognized on delivery. Sales says that you will sell 35 planes (year 4), growing by 5 planes per year. The last sale is made in year 10, when it is replaced by a new model. What are the NPV (as of the beginning of year 1) and the IRR of the plane using a 10% discount rate?

Pages (550 words)
Approximate price: -

High Quality Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level or professional level, and we will assign a writer who has a respective degree.

Experienced Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document.

Timely Delivery

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension.A 100% refund is guaranteed.

100% Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text.

Tutorpro support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Tutorpro Homework Help Services

At Tutorpro, we have top rated masters and PhD writers who will help you tacke that homework and score A+ grade. Tutorpro services covers all levels of education : high school, college, university undergraduate, masters and PhD academic level.

## Essay Writing

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.