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Assignment 2

The document contains examples of calculations related to present value, annuities, depreciation, and loan amortization. It includes questions about growing annuities, perpetuities, required rates of return, straight-line depreciation, double declining balance depreciation, unit of production depreciation, and creating an amortization table for a loan.

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Ahmed Hassan
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8 views2 pages

Assignment 2

The document contains examples of calculations related to present value, annuities, depreciation, and loan amortization. It includes questions about growing annuities, perpetuities, required rates of return, straight-line depreciation, double declining balance depreciation, unit of production depreciation, and creating an amortization table for a loan.

Uploaded by

Ahmed Hassan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1.

A growing annuity pays $1,000 at the end of the first year and grows at a rate of 5%
annually. If the discount rate is 8%, what is the present value of the annuity over 10
years?
2. If a growing annuity has a present value of $10,000, a growth rate of 4%, and a discount
rate of 6%, what is the annuity payment in the first year?
3. You want to save for retirement by investing in a growing annuity. If you aim to receive
$50,000 annually in retirement, and you expect the annuity to grow at a rate of 3%, and
you plan to retire in 20 years, what should be the annual deposit into the annuity if the
interest rate is 7%?
4. Calculate the present value of a perpetuity that pays $1,500 annually if the discount rate
is 6%.
5. If the present value of a perpetuity is $20,000 and the annual payment is $800, what is
the discount rate?
6. A perpetuity pays $200 per year. If the present value is $4,000, what is the discount
rate?
7. If you want to receive $10,000 annually from an annuity, and you expect to live for 25
years after retirement, what is the required rate of return if the present value of the
annuity is $150,000?
8. An investment promises to pay $5,000 annually for 15 years. If the present value of the
investment is $50,000, what is the required rate of return?
9. You are considering an investment that will pay you $2,000 per year for 10 years. If the
present value of the investment is $15,000, what is the required rate of return?
10. A piece of equipment costs $50,000 and has a salvage value of $10,000 after 10 years.
What is the annual depreciation expense using straight-line depreciation?
11. A company purchases a vehicle for $25,000 and expects it to have no salvage value
after 5 years. What is the annual depreciation expense using straight-line depreciation?
12. An office building is purchased for $500,000 and is expected to have a salvage value
of $100,000 after 20 years. What is the annual depreciation expense using straight-line
depreciation?
13. A machine costs $80,000 and has a useful life of 5 years. What is the depreciation
expense for the second year using the double declining balance method?
14. An asset with a cost of $50,000 has a salvage value of $5,000 and a useful life of 10
years. What is the depreciation expense for the third year using the double declining
balance method?
15. A piece of equipment is purchased for $100,000 and has a useful life of 8 years. What
is the depreciation expense for the fifth year using the double declining balance
method?
16. A printing press is purchased for $200,000 and is expected to produce 100,000 units
over its useful life. In the first year, the press produces 10,000 units. What is the
depreciation expense for the first year using the unit of production method?
17. A machine is bought for $150,000 and is expected to produce 500,000 units over its
useful life. In the second year, the machine produces 50,000 units. What is the
depreciation expense for the second year using the unit of production method?
18. An industrial oven is purchased for $300,000 and is expected to produce 1,000,000
units over its useful life. In the third year, the oven produces 200,000 units. What is the
depreciation expense for the third year using the unit of production method?
19. Create an amortization table for a loan of $200,000 with an annual interest rate of 6%,
to be paid off over 20 years.

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