BUSN 380 Week 1 Problem Set

Problem Set 1 (Note: Some of these problems require the use of the time value of money tables in the Chapter 1 Appendix). 1.Ben Collins plans to buy a house for $65,000. If that real estate property is expected to increase in value 5 percent each year, what would its approximate value be seven years from now? 2. At an annual interest rate of five percent, how long would it take for your savings to double? 3.In the mid-1990s, selected automobiles had an average cost of $12,000. The average cost of those same motor vehicles is now $20,000. What was the rate of increase for this item between the two time periods? -------/////////---------//////////-------------//////////-------------/////////////--------------////////////----------- 10. Which of the following employee benefits has the greater value? Use the formula given in the “Financial Planning Calculations” – “Tax-Equivalent Employee Benefits” box found in Chapter 2 to compare these benefits. (Assume a 28 percent tax rate.) A nontaxable pension contribution of $4,300 or the use of a company car with a taxable value of $6,325.