Finance ( Exercises III)

1. Calculate the PV for month 3th and 4th
• =PV(.05/12,4,0,300)
• =PV(.05/12,12,0,300)
2. Add the PVs
3. Substrat 500 minus point 2) = $80.45

Other solution is

1. Use NPV formula =NPV(.05/12,0,0,0,300,0,0,0,0,0,0,0,300)
2. Substrat 500 minus point 1)

Y0 = 10,000
Y1 = 1,300
....
Y7 = 5,000

1. Use the IRR formula =IRR(A1:A7)
2. IRR = 9.12%

Answer is 5

Payback Period = Initial Investment / Cash Inflow per Period

1. Calculate the initial investment = 12,000 - 7,500 = $4,500
2. Calculate the PV of each year
• =PV(0.06,4,1200)
3. Add 1) + 2) = 341.87
4. Calculate the PV of 5th year for $1,200 
• =PV(0.06,4,0,1200) = 896.71
5. Divide 1) between 4)
• 342 / 897 = 3.8 % of 12 months
6. Multiply per 12 months to get the annual average
• 3.8% * 12 = 4.6

E26 = 2,800
B26 = 10% interest rate

1. Calculate the monthly gain = 10K - 7,200
2. Calculate the NPV = NPV(E26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26,B26)
• Other way is calculate the =PV(E26,20,B26)
3. Subtract the step 2) minus the equipment = $13,837.98 

A33 =  $240,000.00

A40 =  $4,5000

H35= step 2)

A39 = 0.055 new rate
H33 = ($1,556.64) monthly payment

1. Calculate the payment =PAYMENT(0.0675/12,30*12, 240000)
2. How much do I owe for next 25 years  =FV(0.0675/12, 5*12,H33,A33)
• H33 = ($1,556.64) This become for step 1)
• This part was difficult for me but as I understand, the formula works as first estimate how mush are the first 5 years of payments and then subtract the initial payment of $240,000.00 after 5 years
3. Add how much you owe plus the pay closing cost =-H35+A40
4. Calculate how much you will pay with the new rate (5.5%) =PV(A39/12, 25*12,H33)
• To be honest I don't know why i use the same amount of payment of step 1). My guess is that you use the same payment because that amount is going to cover the initial credit of 240K, and you are re-financing the gain for the bank (interest rate)
5. Subtract point 3) minus point 4) and this is the answer $23,685.86 

A50 = 25,000 per year
A51 = 10% rate

1. Use the NPV formula 
• =NPV(A51,A50,A50,A50,A50,A50,A50,A50,A50,A50,A50)
2. Subtract point 1) minus costs of 50,000 (lot) - 60,000 parking lot minus = 

   $43,614.18

1. Use the formula of PV for Annuity growing at rate g, using this values:  3% growth rate, n = 20 years, r = 7.5%

• Multiply by $200,000
• Substract $1,000,000 minus the PV annuity =  $1,554,745.19 

Answer = 127,072

1. Use the formula of PV for Annuity, using this values:  n = 20 years, r = 10%
2. Multiply by $72,000
3. Subtract from point 2) the building and renovation = 42,976.59
4. NPV = 42,976.59
   

A135 = 0.09/12
A134 = 15 years because has passed 6 years
A133 = $8,000

1. Calculate the PV =>    =PV(A135,A134*12,A133)