Assignment Coursera Essay Example for Free

Assignment Coursera EssayScore Explanation 6. 34 Correct 5. 00 Correct. This is where a spreadsheet comes in handy. hail 5. 00 / 5. 00 Question Explanation This is a simple IRR calculation. Drawing a time line helps. Question 3 (5 points) Austin needs to purchase a new heating/cooling governance for his home. He is thinking about having a geothermal remains installed, only he wants to know how long it will take to recoup the additional equal of the system. The geothermal system will cost $20,000. A conventional system will cost $7,000. Austin is eligible for a 30% tax quotation to be applied immediately to the purchase. He estimates that he will save 1 ,500 per year in utility bills with the geothermal system. These cash outflows can be tire outd to occur at the end of the year. The cost of capital (or interest commit) for Austin is 7%. How long will Austin have to use the system to Justify the additional expense over the conventional model? ( i. e, What is the DISCOUNTE D ease upback period in years? Discount future cash flows before shrewd payback and round to a whole year. ) Answer for Question 3 Your Answer Score 6 Correct. You discounted before calculating payback, but it still is a very myopic measure.Total Simple payback calculation, but with discounting. Question 4 (10 points) In high school Jeff often made money in the summer by mowing lawns in the neighborhood. He Just finished his freshman year of college and, after taking a Business 101 class, he has virtually ideas about how to scale up his lawn mowing operation. Previously, he had used his fathers push lawn mower, but he is thinking about getting a r101ng mower tnat wlll save tlme ana suffer nvm to 00 more lawns. He Touna a used, zero turn, riding mower on Craigslist for $1,200.He will also need a trailer to pull the mower behind his pickup that will cost him an additional $600. With the new ower he can take on an additional 20 lawns per week at an second-rate cash inflow of $20 p er lawn he will receive at the end of each week. He has 14 weeks of summer in which to mow lawns. (For convenience, assume that the mower and trailer will have no value after Jeff is done with his work this summer. ) The discount rate for Jeff is 10% (Keep in mind this is an yearly rate). What is the Net Present Value of the mower/trailer project? Your Answer -1147 3117 4320 3720 10. 00 Correct.You know how to set up and calculate wv, at a weekly interval. Total 10. 00 / 10. 00 A fairly common NPV problem, with weekly compounding. Question 5 (10 points) Yassein is looking to refinance his home because rates have gone down from when he bought his residence 10 years ago. He started with a 30-year fixed-rate owe of $288,000 at an annual rate of 6. 5%. He can now get a 20-year fixed-rate mortgage at an annual rate of 5. 5% on the remaining balance of his initial mortgage. (All loans require monthly payments. ) In order to re-flnance, Yassein will need to pay closing costs of $3,500.Th ese costs are out of pocket and cannot be rolled into the new mortgage. How much will refinancing save Yassein? (i. e. What is the NPV of the refinancing decision? Your Answer 16467 17517 16975 Correct. This is a very common situation we all face all the time. 15463 A problem we saw last week, but I expect you to do this routinely now. It is a value generating opportunity through financing only because interest rates changed. Question 6 (10 points) Chandra has the opportunity to buy a vacant curing next to several commercial properties for $50,000.She plans to buy the property and spend another $60,000 immediately to put in a parking lot. She has talked to the local businesses and has some contracts lined up to fill the parking spaces. The profits from the ontracts will provide $25,000 per year and the contracts will last 10 years. What is the NPV of Chandras plan if the appropriate discount/interest rate is 10%? (Enter Just the number without the $ sign or a comma round off decim als. ) Answer for Question 43614 Correct. You know how to calculate NPV. Questlon Explanatlon A metre NPV problem.Question 7 (10 points) This question introduces you to the concept of an annuity with growth. The formula is given on p. 3, equation (7), of the Note on Formulae, but I would encourage you to exertion doing it in Excel as well. (If the primary cash flow is C, the next one ill be C(l+g), and so on, where g is the growth rate in cash flow). As an example, the present value of an annuity that starts one year from now at $100, and grows at 5%, with the last cash flow in year 10, when the discount rate is 7%, is $860. Confirm this before attempting the problem using both the formula and excel.What is the NPV of of a new manufacturing project that costs $100,000 today, but has a cash flow of $15,000 in year 1 that grows at 4% per year till year 12? Similar investments earn 7. 5% per year. (Enter Just the number without the $ sign or a comma round off decimals. ) Answer for Question 7 0486 Correct. Hope you used both methods. This is a set up and calculation problem, nothing new conceptually. Question 8 (1 5 points) Diane has Just 18 and also completed high school and is inquire about the value of a college education.She is pretty good with numbers, and driven by financial considerations only, so she sits down to calculate whether it is worth the large sum of money. She knows that her first year tuition will be $12,000, due at the beginning of the year (that is, right away). Based on historical trends she estimates that tuition will fig up at 6% per year for the 4 years she is in school. She also estimates that her living expense above and beyond tuition will be $8,000 per year (assume this occurs at the end of the year) for the first year and will increase $500 each year thereafter to keep up with inflation.