Joe plans to retire in 15 years.  He currently has saved up $400,000, and he believes he will need $1,000,000 at retirement.  What annual interest rate must Joe earn to reach his goal, assuming he does not save any additional funds between now and retirement?

What is the present value of a security that will pay $6,000 in 10 years if securities of equal risk pay 11 percent annually?

Your client is 25 years old, and she wants to begin saving for retirement, with the first payment to come one year from now.  She can save $5,500 per year, and you advise her to invest it in securities which you expect to provide an average annual return of 11 percent.  If she follows your advice, how much money would she have at age 70?

What is the present value of an ordinary annuity that pays $900 per year for 5 years, assuming the annual discount rate is 8 percent?

A firm with a 13 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$7,000 $2,900 $3,000 $3,400 $2,700 Calculate the project’s discounted payback period.

An investment will pay $800 at the end of each of the next 5 years, $1,100 at the end of Year 6, and $1,300 at the end of Year 7.  What is its present value if other investments of equal risk earn 7 percent annually?

An investment will pay $900 at the end of each of the next 3 years, $1,200 at the end of Year 4, and $1,000 at the end of Year 5.  What is its present value if other investments of equal risk earn 9 percent annually?

Martinez Motors’ bonds have 6 years remaining to maturity.  Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 7 percent; and the yield to maturity is 5 percent.  What is the bond’s current market price?

Kuhn Microcomputers is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $8 million 12.5% High Y   6 million   9.0% Average Z   3 million   7.5% Low Kuhn’s WACC is 10 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Kuhn accept assuming it faces no capital constraints?

Bill plans to retire in 24 years.  He currently has saved up $200,000, and he believes he will need $1,000,000 at retirement.  What annual interest rate must Bill earn to reach his goal, assuming he does not save any additional funds between now and retirement?