1.

IOL LLC has borrowed from their bank at a rate of 8 per cent and will repay the loan
with interest over the next five years. Their scheduled payments, starting at the end of
the year are as follows—$450 000, $560 000, $750 000, $875 000 and $1 000 000.
What is the present value of these payments?

2. Fab Ltd, expects to earn cash flows of $13227, $15611, $18970, and $19114 over the
next 4 years. If the company uses an 8 per cent discount rate, what is the future value
of these cash flows at the end of year 4?
3. You are first year at university and are planning a trip to Vietnam when you graduate
at the end of 4 years. You plan to save the following amounts annually, starting today:
$625, $700, $700, and $750. If the account pays 5.75 per cent annually, how much
will you have at the end of 4 years?
4. Cecelia Yeung is a sales executive at a Brisbane company. She is 25 years old and
plans to invest $3000 every year in a retirement savings account, beginning at the end
of this year until she turns 65 years old. If the retirement savings investment will earn
9.75 per cent annually, how much will she have in 40 years when she turns 65 years
old?

5. Ron bought a Honda car for a price of $17,345. He made a down payment of $6000
and financed the balance amount through the dealer at an APR of 4.9% for 4 years.
What is the effective annual rate (EAR) if payments are made monthly?
6. You are evaluating a growing perpetuity product from a large financial services firm.
The product promises an initial payment of $20,000 at the end of this year and
subsequent payments will thereafter grow at a rate of 3.4% annually. If you use a 9%
discount rate for investment products, what is the present value of this growing
perpetuity?

7. Merke holdings is expecting an annual payment of $34225 for the next seven years
from a customer. What is the present value of this annuity if the discount rate is 8.5%?
8. Petrofina owns several petrol stations. Management is looking to open a new station
in the western suburbs of Milan. One possibility they are evaluating is to take over a
petrol station at a site that has been leased from the city. The lease, originally for 99
years, currently has 73 years before expiration. The petrol station generated a net cash
flow of $92500 last year and the current owners expect an annual growth rate of
6.3%. If Petrofina uses a discount rate of 14.5% to evaluate such businesses, what is
the present value of this growing annuity?