his Question 1 pt 8 of 19 0 completeThis Test 19 pts possibl

his Question: 1 pt 8 of 19 (0 complete)This Test: 19 pts possible Question Help Wally, president of Wally\'s Burgers, is considering franchising. He has a potential franchise agreement hat would allow him to receive 10 end-of-year payments starting one year from now. The first two payments would be $26,000 and $24,000 in one and two years respectively, and then $16,000 per year after that for 8 years. If wally requires a return of 9.7%, what is the present value of this stream of cash flows? What is the present value of this stream of cash flows? (Round to the nearest cent.) This Question: 1 pt 9 of 19 (0 complete)This Test: 19 pts possibl Question Help Determi fully during the stated term. ne the equal, annual, end-of-year payment required over the ife of the following loans to repay them Interest Rate (%) 6 15 Term of Loan (Yrs) 20 9 Annual Payment (s) Loan Principal ($) 20,000 30,000 Interest Rate (%) Term of Loan (Yrs) 20 Annual Payment (s) Loan Principal ($) 20,000 30,000 ? (Round to the nearest cent) 15 (Round to the nearest cent)

Solution

Answer 1. Year Cash Flow 9.70% Factor PV 1    26,000.00 0.91158      23,701.08 2    24,000.00 0.83097      19,943.28 3-10    16,000.00 4.48201      71,712.16 Total PV - Cash Inflow    115,356.52 Answer 2. EMI = [P x R x (1+R)^N]/[(1+R)^N-1] Loan A EMI = [$20,000 x 6% x (1+6%)^20]/[(1+6%)^20 -1] EMI = [$3848.56 / 2.21] EMI = $1,743.69 (Approx.) Loan B EMI = [$30,000 x 15% x (1+15%)^9]/[(1+15%)^9 -1] EMI = [$15,830.44 / $2.52] EMI = $6,287.22 (Approx.)