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PD1 2022-2
PD1 2022-2
PD1 2022-2
PRÁCTICA DIRIGIDA #1
Exercises
1. A lender analyzes the following information, given a discount rate of 7%, calculate the Present
Value of a flow of $15,000 that will be received in 6 years.
2. A hospital in Lima is evaluating starting a COVID testing center. For this, it does not require an
additional investment since it would only assign a certain amount of personnel to this area.
However, it is considered that income equivalent to $100,000 will only be received after year 3.
Determine what additional value this area would generate for the company. Assume that the
discount rate is 10%.
3. Consider the cash flow (in thousands of dollars) from these two projects in Piura:
Y 0 1 2 3 4 5
PROJECT A -60 20 20 20 20 28
(Arándanos)
PROJECT B -72 45 22 13 13 13
(Limones)
a. What is the NPV of each project? Assume that the cost of capital is 11%.
b. Assuming the projects are independent, would you accept them if the cost of capital were
15%?
c. If the projects were mutually exclusive, which would you choose if the discount rate is 15%?
4. The project to buy printers for each building of the Maria Vergara house requires an investment
of US$100,000, so that the first year generates a cash flow of US$50,000. It is estimated that
during the next 4 years, the cash flow of year 1 will grow at an annual rate of 7%. The
opportunity cost of this project is 9%. Calculate the NPV of the project.
Annuity
5. A mother buys insurance to pay for her children's future college and makes a $250 tax payment
every year for the next 15 years. Calculate the future value, assuming that the investment expects
a return of 2%.
Perpetuity
6. Calculate the value of the ALICORC stock that pays a dividend of $2.5 per year, if this dividend
is expected to grow at a rate of 2% per year forever. Assume that the discount rate is 9%.
Arbitration
PV
a) FV = n
(1+r )
b) PV =
c) FV = Cn × (1 +
r)n d)
6) If we use future value rather than present value to decide whether to make an
investment, which of the following statement is CORRECT?
a) We will make a bad decision, since the future value will always be higher if the discount
rate is positive.
b) We will make a bad decision, since the future value will always be lower if the discount
rate is positive.
c) We will make the same decision using either future value or present value.
d) None of the above is correct.
9) If the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between
receiving $1000 in one-year and receiving how much today?
10) Suppose you have $1,000 today and the risk-free rate of interest (rf) is 3.5%. What is
the equivalent value in one year?
11) A project that you are considering today is expected to provide benefits worth
$168,000 in one year. If the risk-free rate of interest (rf) is 4.5%, then what is the value
today of the benefits of this project?
12) Alekipa Steel (AS) Inc. needs to order a new blast furnace that will be delivered in one
year. The $1,000,000 price for the blast furnace is due in one year when the new
furnace is installed. The blast furnace manufacturer offers AS a discount of $50,000 if
they pay for the furnace now. If the interest rate is 7%, should AS choose to pay now to
take advantage of the discount?
Assume that the risk-free interest rate is 10%. Calculate the NPV for each of the four
projects. Rank the four projects from the most desirable one to the least desirable one
based upon NPV. Which project would you invest in first? Are there any projects that
you wouldn't invest in and why?
The owner of La PAVITA is considering selling his sandwich store and retiring. An
investment fund has offered to buy the LA PAVITA for $350,000 at any time no more
than one year from now on. The owner is considering the following three alternatives:
14.1) If the interest rate is 7%, what is the NPV of alternative #1?
14.2) If the interest rate is 7%, what is the NPV of alternative #2?
14.3) If the interest rate is 7%, what is the NPV of alternative #3?
14.4) Which alternative has the highest NPV? Which alternative has the lowest NPV?
Which alternative should the owner choose?
15) Suppose a security has a risk-free cash flow of $1000 in one year. If there are no
arbitrage opportunities and the current risk-free interest rate is 10%, how much should
the security trades at today?
16.1) If the risk-free rate of interest is 7.5%, what is the value of security "A"?
16.2) If the risk-free rate of interest is 7.5%, what is the value of security "B" ?
17) You have been offered the following investment opportunity, if you pay $2500 today,
you will receive $1000 at the end of each of the next three years. Draw a timeline
detailing this investment opportunity. Caculate the NPV of this investment opportunity
if the discount rate will keep constant at 10%. Is it a good investment opportunity?
18) At an annual interest rate of 7%, the future value of $5,000 in five years is:
19) At an annual interest rate of 7%, the present value of $5,000 received in five years is:
If the current market rate of interest is 9%, what is the present value of this timeline as
of year 0?
If the current market rate of interest is 7%, then the future value of this timeline as of
year 3 is:
22) Use the following information to answer the question(s) below.
Your great aunt Matilda put some money in an account for you on the day you were
born. This account pays 8% interest per year. On your 21st birthday the account balance
was $5,033.83.
22.1) The amount of money that your great aunt Matilda originally put in the account
is:
22.2) The amount of money that would be in the account if you left the money there
until your 65th birthday is:
23.1) If the appropriate interest rate is 10%, what is the NPV of this opportunity?
Should you invest in it and why?
23.2) If the appropriate interest rate is 15%, what is the NPV of this opportunity?
Should you invest in it and why?
25) The British government has a consol bond outstanding that pays ₤100 in interest each
year. Assuming that the current interest rate in Great Britain is 5% and that you will
receive your first interest payment one year from now, then the value of the consol
bond is:
26)The British government has a consol bond outstanding that pays ₤100 in interest each
year. Assuming that the current interest rate in Great Britain is 5% and that you will
receive your first interest payment immediately upon purchasing the consol bond, then
the value of the consol bond is:
27) Consider a growing perpetuity that will pay $100 in one year. Each year after that, you
will receive a payment on the anniversary of the last payment that is 6% larger than the
last payment. This pattern of payments will continue forever. If the interest rate is 11%,
then the value of this perpetuity is:
28)If the current rate of interest is 8%, then the present value of an investment that pays
$1000 per year from one year onwards and lasts 20 years is:
29.1) The present value (at age 30) of your retirement savings is: