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Author Question: Suzy wants to buy a house but does not want to get a loan. The average price of her dream house is ... (Read 36 times)

Arii_bell

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on: Jul 10, 2018
Suzy wants to buy a house but does not want to get a loan. The average price of her dream house is 500,000 and its price is growing at 5 percent per year.
 
  How much should Suzy invest in a project at the end of each year for the next 5 years in order to accumulate enough money to buy her dream house with cash at the end of the fifth year? Assume the project pays 12 percent rate of return.

Question 2

For a project that has an initial cash outflow followed by cash inflows, the profitability index (PI) is equal to the present value of cash inflows divided by the cost of capital.
 
  Indicate whether the statement is true or false


beccamahon

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Reply #1 on: Jul 10, 2018
Answer to Question 1

FV = 500,000(1.05)5 = 638,141
PV= 0, I=12, N=5, FV=638,141, CPT PMT = 100,450

Answer to Question 2

FALSE


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