ACCTING 1002 Lecture Notes - Capital Asset Pricing Model, Fisher Equation, Standard Deviation

For each of the following cases, indicate (a) what interest rate columns and (b) what number of periods you would refer to in looking up the future value factor.

1.) In table 1 (future value of 1)

2.) In Table 2 (future value of an annuity of 1)

4. Consider the following cases Case Amount of Initial deposit $Stated Annual Rate, r (%) Compounding Frequency, m (times/year)Deposit Period (years) A 2,500 6 2 5 B 50,000 12 6 3 C 1,000 5 1 10D 20,000 16 4 6 a. Calculate the future value at the end of thespecified deposit period. (2 POINTS) b. Determine the effectiveannual rate (EAR). (2 POINTS) c. Compare the stated annual rate (r)to the effective annual rate (EAR). What relationship existsbetween compounding frequency and the stated and effective annualrates?

5) Citrus Company is considering a project that has estimated annual net cash flows of $23,430 for four years and is estimated to cost $110,000. Citrus’s cost of capital is 6 percent.


Determine the net present value of the project. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round your final answer to 2 decimal places.)