Finding Present Value for a Series of Cash FlowsExcel LabFinding Present Value for a Series of Cash FlowsExcel Lab – cont.EGR 312-7 (Spring '12)Finding Present Value for a Series of Cash FlowsExcel LabExercise 1 – Find the present value for the following cash flow (assume i = 8%).a) Use the PV method for each individual cash flow.b) Use the NPV method for the series of cash flows.Exercise 2 – A new home buyer has just purchased a home for $110,000 with a 30-yearloan at an interest rate of 5.875% per year.a) What is the monthly mortgage payment for this loan? What is the future valueof the loan when it is paid off?b) The home owner plans to add an extra $100 each month to her mortgage payment. If she does this consistently, when will the loan be paid off? Now what will be the future value of the loan when it is paid off?c) How much extra should the homeowner pay each month in order to pay theloan off in 20 years?EGR 312 1 $300$450$500P = ?0 1 2 3 4 5 6 7 8 $200$150EGR 312-7 (Spring '12)Finding Present Value for a Series of Cash FlowsExcel Lab – cont.Exercise 3 – Use Excel to find the future value (F) at the end of period 9 for the above cash flow from exercise 1 (assume i = 8%).Exercise 4 – Use Excel to find the annual worth (A) over the seven period cash flow from exercise 1 (assume i = 8%).Exercise 5 – When their only child started kindergarten, a young couple opened a college savings plan with a single lump sum of $5000. Assuming the child starts college after he graduates from high school (13 years after he starts kindergarten), how much must the parents put in his account each year, including the 4 years he is in college, such that $0 remain in his account upon graduation. a) What will be the cost of education (tuition only) when the child is ready to start college? Let’s make the following assumptions. The current tuition for college in a public institution is $6,000. It is increasing at a rate of 6% per year. What will the cost be in each of the 4 years he is in college?b) Create the cash flow diagram, starting with the $5000 currently in the account, and noting the annual installments the parents will make starting at the end of year 1 through his last year in college, and note the cash outflows from the account for the 4 years he is in college.c) Determine the annual installments that the parents must put into his account such that $0 will remain in his account upon graduation. Assume a 6% interest rate.EGR 312
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