Review this week’s Learning Resources. Reflect on concepts of time value of mone
ID: 2779891 • Letter: R
Question
Review this week’s Learning Resources. Reflect on concepts of time value of money, net present value, internal rate of return, and purchasing options. The Assignment: Use the “Week 10 Assignment Capital Budget Excel Template” to show your work, answer the following questions: 1. If a physician deposits $34,000 today into a mutual fund that is expected to grow at an annual rate of 8%, what will be the value of this investment: a. 3 years from now b. 6 years from now c. 9 years from now d. 12 years from now 2. The Chief Financial Officer of a hospital needs to determine the present value of $150,000 investment received at the end of year 5. What is the present value if the discount rate is: a. 3% b. 6% c. 9% d. 12% 3. Calexico Hospital plans to purchase a new MRI machine for 1.8M. The expected cash flow for each of the five year period is $320,000, $460,000, $485,000, $515,000, and $550,000 for the five years. What is the internal rate of return or IRR for the project? 4. Determine the Net Present Value for Problem 3 with a rate of 10%. Do you proceed or not with the project? 5. Determine the payback period for Problem 3.
Explanation / Answer
1.
Mutual Fund investment Value = $34,000
Rate of return = 8%
a.
Value of investment after 3 year = $34,000 × (1 + 8%) ^ 3
= $34,000 × 1.2597
= $42,830.21.
Value of investment after 3 year will be $42,830.21.
b.
Value of investment after 6 year = $34,000 × (1 + 8%) ^ 6
= $34,000 × 1.5869
= $53,953.73
Value of investment after 6 year will be $53,953.73.
c.
Value of investment after 9 year = $34,000 × (1 + 8%) ^ 9
= $34,000 × 1.9990
= $67,966.16
Value of investment after 9 year will be $67,966.16.
d.
Value of investment after 12 year = $34,000 × (1 + 8%) ^ 12
= $34,000 × 2.5182
= $85,617.78
Value of investment after 12 year will be $85,617.78.
1.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.