Question from a practice exam:

Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is 0,000 with an estimated residual value of ,000 and a useful life of eight years. Cash inflows are expected to increase by ,000 a year. The company’s minimum rate of return is 10 percent. The present value of for eight years at 10 percent is 0.467, and the present value of an annuity of at 10 percent and eight years is 5.335.

You are asked what the rate of return will be with this choices:
A) Unable to determine from the data given
B) less than 10%
C) greater than 10%
D) 10%

Rate of return isn’t covered in this aspect in my book. Any suggestions on what to do to figure this out?

I am having difficulty figuring out how to go about solving these problems. I have an HP 10BII calculator.

*You pay 0,000 in equity for a real estate investment which is expected to produce after-tax cash flows of ,000 per year for 7 years. At the end of year 7, you expect to sell the property for an after-tax cash flow of ,000. If your required rate of return is 10%, what is the NPV of the investment?

*Suppose you recently purchased a house with a loan of ,000. The terms were 15% interest, annual payments of ,988.07 (principal and interest) for 20 years. Using present value annuity factors, what proportion of the loan will have been paid off after 20 years?

Also, I’m having trouble with finding the annual percentage increase in another problem. If you could walk me through solving any (or all) of these problems, I would really appreciate it!!

years and no salvage value. The company requires a 12% return on its investments. The factors for the present value of annuity of 1 for different periods follow:
Periods 12 Percent
1 0.8929
2 1.6901
3 2.4018
4 3.0373

Assuming all revenue is to be received at the end of each year, what are the net cash flows for this investment if net present value equals (,970)?

I don’t understand this part; Does this mean that they will take money out of my account? Oh and I did the same for my parents, and does that mean they will take money out of my parents bank?

As of today, what is your (and your spouse’s) total current balance of cash, savings, and checking accounts (question 43)? (Do not include student financial aid.):

Net worth means the current value of investment(s) minus debt (what is owed). If net worth is one million or more, enter 999999. If net worth is negative or zero, enter 0.

Investment debt means only those debts that are related to the investments.

Investments include real estate (other than the home you (and your spouse) live in), trust funds (such as UGMA and UTMA accounts), money market funds, mutual funds, certificates of deposit, stocks, stock options, bonds, other securities, Coverdell savings accounts, 529 college savings plans, the refund value of 529 prepaid tuition plans, installment and land sale contracts (including mortgages held), commodities, etc. Investment value means the current balance or market value of these investments as of today. Investment debt means only those debts that are related to the investments.

Investments do not include the home you (and your spouse) lives in; cash, savings and checking accounts; the value of life insurance and retirement plans (pension funds, annuities, noneducation IRAs, Keogh plans, etc.).

Note: If you are required to report parental information and your parents own a qualified educational benefit plan, or education savings accounts – including "529" college savings plans and Coverdell savings accounts – your parents should report the current balance of the plan as a parent asset (Q88). The amount to be reported for a prepaid tuition plan is the "refund value" of the plan.

If you are required to report parental information and you own any qualified educational benefit plans – you should not report the value of those plans.

If you are not required to report parental information and you own (or if married, your spouse owns) any of these qualified educational benefit plans – you should report the current balance of those plans as a student/spouse asset (Q44). The amount to be reported for a prepaid tuition plan is the "refund value" of the plan.