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Problem Set On TVM

This document contains examples of time value of money calculations including present value, future value, and net present value problems. It provides 12 examples of calculations involving topics like simple and compound interest, lump sum payments, annuities, and net present value analysis for investment decisions. The examples range from basic single period calculations to multi-period problems involving unequal cash flows over several years.

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alle ebita
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44 views

Problem Set On TVM

This document contains examples of time value of money calculations including present value, future value, and net present value problems. It provides 12 examples of calculations involving topics like simple and compound interest, lump sum payments, annuities, and net present value analysis for investment decisions. The examples range from basic single period calculations to multi-period problems involving unequal cash flows over several years.

Uploaded by

alle ebita
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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TIME VALUE OF MONEY 7) Problem on Present Value of Unequal

Installments
BASIC PROBLEMS On July 31, 2018, Ash will start to invest installments
1) Problem on Kinds of Interest of P50,000 every July 31 and P100,000 every
Nicanor Has Invested P300,000 at 6% simple December 31, beginning December 31, 2018 until
interest for a period of three years. December 31, 2020.The investment will earn 6%
(1) How much is the total interest? semi-annually. What is the Present Value of the
(2) How much is the interest per year? investment?
(3) Assume that interest compound annually, how
much is the total interest? 8) Problem on Present Value of equal
(4) Assume that interest compound annually, how installments
much is the interest on Year 1, Year 2, or Year 3? On July 31, 2018, Ash will start to invest equal
installments of P100,000 every July 31 and
FUTURE VALUE December 31, beginning December 31, 2018 until
2) Problem on Future Value of Money- December 31, 2020. The investment will earn 6%
Compounded Quarterly semi-annually. What is the Present Value of the
Mrs, Second Problem invested P300,000 at 8% investment?
interest compounded quarterly for a period of 5
years. 9) Problem on Present Value Annuity
(1) What is the future value on the fifth year? Angel invested P5,000 every beginning of the year
(2) How much is the total interest earned? at 10% interest compounded annually for 4 years.
(3) How much is to be withdrawn, if the What is the Present value of the investment after 4
investment is withdrawn on the third year? years?
(4) How much is the interest earned on the 13th
period?
NET PRESENT VALUE PROBLEMS
(5) How much is the interest earned on the 4th
year? 10) The management of Fine Electronics Company
is considering purchasing an equipment to be
3) Problem on Future Value of Money Unequal attached with the main manufacturing machine. The
Installments equipment will cost $6,000 and will increase annual
Mike will invest semi-annually beginning with P1,000 cash inflow by $2,200. The company normally earns
at the end of the first period, increasing by P1,000 20% on its investments. What is the Net Present
per period, at 20% interest compounded Semi- Value of the Investment?
annually for 2 years How much is the Future Value?
11) A project requires an initial investment of
4) Problem on FV of Money Equal Installments $225,000 and is expected to generate the following
Angel invested P5,000 every end of the year at 10% net cash inflows:
interest compounded annually for 4 years. What is
Year 1: $95,000
the future value of the investment after 4 years?
Year 2: $80,000
5) Problems on Future Value Annuity Due Year 3: $60,000
Angel invested P5,000 every beginning of the year Year 4: $55,000
at 10% interest compounded annually for 4 years. Required: Compute net present value of the project
What is the future value of the investment after 4 if the minimum desired rate of return is 12%.
years?
12) Machine Manufacturing Company considers a
PRESENT VALUE project that will require an initial investment of
6) Basic Problem on Present Value of Peso P500,000 and is expected to generate future cash
Lumpsum flows of P200,000 for years 1 through 3 and
JB wanted to raise P500,000 on an 3-year P100,000 for years 4 through 7. If the rate of return
semiannual investment earning a 5% interest is 10%, should the company invest in the project
compounded semi monthly. How much should be his
initial investment?

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