Since the cash flows are per month,

int rate given per annum 0.12

int rate given per month 0.01
n in years 15
n in months 180
C 6000
Present value of Annuity
PVA=[1/ - 1/( (1+) ^ )
Cash flows start at] t=5
PVA at t=5 499929.984
PV=/(1+)^5
30% of pension amount at t=5 149978.995
To get PV of pension amount at t=0, discount back 5 yrs
C 149978.995
r 0.01
n 60
Amount to be borrowed now (t=0) equivalent to 30% of pension amount is equal to
82555.88
PV from provident fund 100000
r% p.a. 0.1
C 20000
n ?
It is an ordinary annuity

PVA=[1/ - 1/( (1+) ^ )

]
100000=20000[1/0.1 - 1/
(0.1(1.1)^)]
5=1/0.1 [1 - 1/((1.1)^) ]

0.5= [1 - 1/((1.1)^) ]

1/((1.1)^) =0.5

(1.1)^n=2
nn*ln(1.1)=ln(2)
in years 7.2725408973
 $
a. Present value at t=0 500000
b Present value at t=0 564473.9301 Discount back 6 years= 100000/(1.1)^6
c Present value at t=0 600000 PV of a perpetuity=C/r=60000/0.1
PVA=100000[1/0.1 - 1/
d Present value at t=0 614456.7106 PV of an ordinary annuity (0.1 (1.1) ^10 ) ]
e Present value at t=0 700000 PV of growing perpetuity=C/(r-g)=35000/(0.1-0.05)
00[1/0.1 - 1/
^10 ) ]
 = 80000*60**
_=
80000*60* . ^*
t2 = 80000*60** ^
80000*60* . ^* .
t1 = 80000*60*0.94*1.04

t0 = 80000*60 ^

..

growth rate (g%) in production value= (1-6%)(1+4%)-1 -0.0224

Present value of growing annuity
PVGA=First GA payment at C1*[(1((1+)/(1+))^)/()]

First GA payment 4692480

g -0.0224
r 0.12
n 20 Calculation
PVGA 30781328.93 r-g 0.1424
(1+g)/(1+r) 0.8728571
((1+g)/(1+r))^20 0.0658967
1-((1+g)/(1+r))^20 0.9341033
Annuity Factor 6.5597145
PVGA 30781329
0**
* . ^* .

1+))^)/()]
Growing perpetuity with negative growth rate
a. PV of growing perpetuity= C/(r-g)
c 120
r 0.12
g -0.03

PVGP 800

Growing annuity with negative growth rate

PVGA=C*[(1((1+)/(1+))^)/
b PV of growing annuity ()]
n 25
Calculation
(1+g)/(1+r) 0.8660714
((1+g)/(1+r))^n 0.027469
(1-((1+g)/(1+r))^n)/(r-g) 6.48354
PVGA 778.0248
One approach
Payment No. t Cash Flows FV of Investment at t=18 as calculated on present day t=0
1 -1 100000 514166.13
2 0 108000 509449
3 1 116640 504775.16
4 2 125971.2 500144.2
5 3 136048.9 495555.72
6 4 146932.81 491009.33
7 5 158687.43 486504.66
8 6 171382.43 482041.32
9 7 185093 477618.92
10 8 199900.46 473237.09
11 9 215892.5 468895.47
12 10 233163.9 464593.68
13 11 251817 460331.35
14 12 271962.37 456108.13
15 13 293719.36 451923.65
16 14 317216.91 447777.56
17 15 342594.26 443669.51
18 16 370001.81 439599.15
19 17 399601.95 435566.13
20 18 431570.11 431570.11
9434536
Alternatively
Note that the duration of the savings plan is 20 years.

Second, nowhere in the problem are we told that the payments happen at the beginning of the time period. In the a

Third, as we all know, we are living in time zero. However the first payment of Rs. 1,00,000 in-connection with this s

Fourth, we are not asked to find value/present value at time t=minus 2 but rather future value at the end of this grow

Fifth, the idea behind this question is to find out future value of growing annuity at the end of the growing annuity ke

So, future value of growing annuity will be {[(1+r)^(number of years of growing annuity) (1+g)^(number of years of

g 0.08
r 0.09
n 20
c 100000
FVA =[ [(1+) ^(1+)^ ]/
(rg)

=100000[ [(1.09) ^201.08^

20]/((0.090.08))
=100000[ [(1.09) ^201.08^
20]/((0.090.08))

FVGA 9434536
of the time period. In the absence of any such explicit details, the default assumption of cash flows at end of the time period holds.

00 in-connection with this savings plan has already occurred at the end of time t = minus 1. The second payment of 1,00,000 x 1.08 happen

alue at the end of this growing annuity. Now the first payment of 1,00,000 at t = minus 1 grows for another 19 years; while the second paym

d of the growing annuity keeping-in-view that the growing annuity has already commenced. So, the point of reference for this question is the

(1+g)^(number of years of growing annuity)]/(r-g)} x First Cash Flow pertaining to the growing annuity
e time period holds.

nt of 1,00,000 x 1.08 happens at time t=0 (which is current time period). Please note that this savings plan comprises of 20 payments of gro

years; while the second payment of 1,00,000x1.08 grows for another 18 years; the last but one payment (penultimate) payment of Rs. 1,00,

erence for this question is the end of time t=18, for t=18 marks 20 full years of completion of this growing annuity.
mprises of 20 payments of growing annuity in totality. With the first payment happening at the end of t = minus 1 and the second payment h

ltimate) payment of Rs. 1,00,000x1.08^18 will grow for one year; and the last payment of 1,00,000x1.08^19 will not grow at all.
 1 and the second payment happening at t = zero, the growing annuity of 20 years will last till end of time t = 18. Put simply the 20 year gro

will not grow at all.

8. Put simply the 20 year growing annuity lasts from end of time t = minus 1 to time t=18. So, if we were to go back in time and calculate th
back in time and calculate the value of this growing annuity, how far will we go back? The value of any stream of cash flow in finance is the
m of cash flow in finance is the value as on one time period before the commencement of the cash flow stream. In this case the first cash flo
. In this case the first cash flow of Rs. 1,00,000 happens at time t=minus 1. So. We would have to go back to end of time t= minus 2 to calc
end of time t= minus 2 to calculate the value.
Compounding Weekly
m 52
r 0.08
EIR =(1+/)^-1

EIR 0.08322
 t15 t16 t17
t2

_
t0
..

Years of education t=16 to t=19 ( 4 years)

r 0.08 c 1000000
n of annuity 4
PV of college education at t=15
PVA=[1/ - 1/( (1+) ^ )
]
Calculation
Annuity Factor 3.3121268
PVA at t=15 3312127
PV of college education at t=0 1044121 (discount back 15 yrs)

PV of savings at t=0
PVA=x[1/0.08 - 1/
(0.08 (1.08) ^ ) ]

PV of savings (t=0) is same as PV of college education at t=0

Therefore, solve for x
1044121=x[1/0.08 - 1/
(0.08 (1.08) ^ ) ]
x 12199.46
t17 t18 t19
PV 500000
r 0.14
n 4
500000=x[1/0.14 - 1/
(0.14(1.14)^4) ]
Annuity Payment 171602.39

Amortization Schedule

Outstanding
balance at
the Portion of Outstanding bal
beginning of Annuity principal at end of the
Year the year payment Int @14% repaid period
1 500000 171602.39 70000 101602.39 398397.60836098
2 398397.6084 171602.39 55775.665 115826.73 282570.8818925
3 282570.8819 171602.39 39559.923 132042.47 150528.41371844
4 150528.4137 171602.39 21073.978 150528.41 0.000000
Pay 100 each 6-month, so 1 year we pay 2 times at the beginning

We pay in 5 times in 2.5years

C 100
r% p.a. 12%
r% per six months 0.06
n periods 5
Future value of annuity due

=[(1+)^1]/*
(1+r)
FV of annuity due 597.53185
In 10 years, we have 20 periods of 6-month, so we have number of periods of FV= 20-5=15
n 15
FV 1432.02 ( FV=C(1+r)^n)
1 year, 5 deposits are made at the beginning of each quarter
so over 10 years, we have 40 quarters
Given, FV at t=40 quarters 1432.02
R % P.A 0.12
r% per quarter 0.03
n (quarters) 40
PV at t=0 of 1432.02 =/
(1+)^
PV at t=0 438.99552712

now you invest some x amount each year at 3% quaterly compounded int, over 5 deposits in a year at the beginning
find x
PVA due=x[1/0.03 - 1/
(0.03 (1.03) ^5 ) ](1.03)
438.996=x[1/0.03 - 1/(0.03 (1.03) ^5 ) ] Calculation
(1.03) Annuity factor 4.5797072
x 93.064738
x 93.06473803
n a year at the beginning
Bank rate 0.15 m 12 (compounded monthly)
Rate to customer r m 4 (compounded quaterly)

(1+0.15/12)^12=(1+r/4
)^4
Calculation
1.1607545177 LHS
1.0379707031
0.0379707031
0.1518828125

r% 0.151883
One way
FV of $850 deposited in bank (compounded daily)
FV=C(1+r/m)^(n*m)
C 850
r % p.a 0.0676649
m 365
n years 15 months 1.25 yrs
FV 925.01471

BUY NOTE as $ 850 grows to $ 925.0147 only, while note gives 1000$ at end of 15 months

Alternatively
1000=850(1+r)/365)^(365*1.25)
r 0.1300383

BUY NOTE as int rate on note os 13% while bank rate is less (6.67%), almost double
 = 40000*1.05^10
_= 40000*1.05^10

t10 = 40000*1.05^10
t0 = 1 lac savings

Value of retirement payment at t=10, for a 25 year retirement income. first payment happening at t=10

PVA=[1/ - 1/( (1+) ^ )

] (1+r)
C 65155.785 (Inflation protected income= 40000*1.05^10)
r 0.08
n 25
PVA 751165.3

Future value of savigs as on t=10

c 100000
r 0.08
n 10
=(1+)^
a) For 1 lac, that gets 8% return
FV 215892.5
b) Some amount x annually is invested for 10 years at 8% interest.

= [(1+)
^1]/

= [( 1.08 ^10 )
1]/0.08" "

Since Value of savings are equal to value of income, equate to get x

Calculation
751165.3=215892.5+ [( 1.08 ^10 )1]/0.08"
"
14.486562 Annuity factor
x 36949.61 535272.8
36949.608
05^10
PV 1000000
r 0.15
n 5
500000=x[1/0.14 - 1/
(0.14(1.14)^4) ]
Annuity Payment 298315.55

Amortization Schedule

Outstanding
balance at
the Portion of Outstanding bal
beginning of Annuity principal at end of the
Year the year payment Int @14% repaid period
1 1000000 298315.55 150000 148315.55246 851684.44753847
2 851684.4475 298315.55 127752.67 170562.88533 681121.56220771

Proportion of annuity payment towards principal at t=2 0.5717532456 At t=2, proportion =170
At t=2, proportion =170562 divided by 298315.6
J Smythe Inc

Input Area:

Price $ 5,600
Year 1 quantity 1,300
Year 2 quantity 1,325
Year 3 quantity 1,375
Year 4 quantity 1,450
Year 5 quantity 1,320
Variable cost 45%
Fixed costs $ 1,700,000
New Inventory 10%
Lost sales 200
Price of lost sales $ 4,500
VC on lost sales 40%
Old inventory 10%
Equipment $ 10,500,000
Salvage value:
Purchase today $ 2,800,000
Purchase in 2 years $ 6,100,000
Tax rate 40%
Required return 14%
Year 1 depreciation 14.30%
Year 2 depreciation 24.50%
Year 3 depreciation 17.50%
Year 4dep 12.50%
Year 5 dep 8.90%
Output Area:

Initial cash outlay

Inventory $ (728,000)
Old Inventory 90,000
$ (638,000)

Year 2 capital spending

Equipment $ (10,500,000)
Total cost $ (10,500,000)

Book value of equipment in five years $ 4,588,500

Year 5 aftertax salvage value
Sell equipment $ 6,100,000
Taxes (604,600)
Total $ 5,495,400

Sales Year 1 Year 2 Year 3

New table $ 7,280,000 $ 7,420,000 $ 7,700,000
Old table (900,000) (900,000) (900,000)
Total $ 6,380,000 $ 6,520,000 $ 6,800,000

Variable costs
New table $ 3,276,000 $ 3,339,000 $ 3,465,000
Old table (360,000) (360,000) (360,000)
Total $ 2,916,000 $ 2,979,000 $ 3,105,000

Sales $ 6,380,000 $ 6,520,000 $ 6,800,000

VC 2,916,000 2,979,000 3,105,000
Fixed costs 1,700,000 1,700,000 1,700,000
Dep. - - 1,501,500
EBT $ 1,764,000 $ 1,841,000 $ 493,500
Tax 705,600 736,400 197,400
NI $ 1,058,400 $ 1,104,600 $ 296,100
+Dep. - - 1,501,500
OCF $ 1,058,400 $ 1,104,600 $ 1,797,600

NWC
Beginning $ 638,000 $ 652,000 $ 680,000
Ending 652,000 680,000 722,000
Old table
Change $ (14,000) $ (28,000) $ (42,000)

Capital spending $ (10,500,000)

Total Cash flow $ 1,044,400 $ (9,423,400) $ 1,755,600

NPV $ (249,542.35)
 Year 4 Year 5
$ 8,120,000 $ 7,392,000
(900,000) (900,000)
$ 7,220,000 $ 6,492,000

$ 3,654,000 $ 3,326,400
(360,000) (360,000)
$ 3,294,000 $ 2,966,400

$ 7,220,000 $ 6,492,000
3,294,000 2,966,400
1,700,000 1,700,000
2,572,500 1,837,500
$ (346,500) $ (11,900)
(138,600) (4,760)
$ (207,900) $ (7,140)
2,572,500 1,837,500
$ 2,364,600 $ 1,830,360

$ 722,000 $ 649,200
649,200 -
(90,000)
$ 72,800 $ 559,200

$ 5,495,400

$ 2,437,400 $ 7,884,960