# If a physician deposits \$24,000 today into a mutual fund that is expected to grow at an annual rate of 8%, what will be the value of this investment:3 years from now, 6 years from now, 9 years from now and 12 years from now

a. \$24,000 = (1 + 0.08)3 = 32,768 \$24,000 x (1 + 0.08)^6 = \$45,158.72 c. \$24,000 x (1 + 0.08)^9 = \$60,977.56 d. \$24,000 x (1 + 0.08)^12 = \$81,302.97

1.

a. \$120,000 / (1 + 0.03)^5 = \$90,829.51 b. \$120,000 / (1 + 0.06)^5 = \$81,717.66 c. \$120,000 / (1 + 0.09)^5 = \$73,968.43 d. \$120,000 / (1 + 0.12)^5 = \$67,382.23

1. We need to calculate the IRR or internal rate of returns for the project by finding the discount rate which makes the expected cash flow net present value (NPV). Here is the formula to calculate NPV:

NPV = C0 + (1+ r.)1) + (1+ r.)2) + (1+ r.)3) + (1+ r.)3) + (1+ r.)4) + (1+ r.)4) + (1+ r.)5)

The initial investment is C0, the cash flow expected for each year is C1, C2, and C3, while C3 and C4 are C3 and C4, respectively.

1. We will use this formula to determine the net present value.

The NPV is (-C0/ (1+r)1) +(C2/ (1+r)2) +(C3/ (1+r)3) + (+C4/ (1+r)4) + (+C5/ (1+r)5)

The initial investment is C0, which is \$900,000. C1, C2, and C3 are expected cash flows each year. C1, C3, and C4 represent the annual cash flows (\$120,000 to \$155,000 respectively), while C2, C3, and C4 refers to the anticipated cash flow for each year (\$120,000, \$156,000, \$208,000 and \$225,000, respectively). r is the discount rate (10%)

The NPV is (-900,000.00) + (120,000/ (1+ 0.1.1) + (155,000/ (1+ 0.1.2) + (186,000/ (1+ 0.1.3) + (208,000/ (1+ 0.1.4) + (225,000/ (1+ 0.1.1)5)

NPV = +900,000. +108.333 +125.500 +153.286 +185.185 + 194,476

1.042,770 = National Poverty Value

The NPV of a project that generates more value than it costs is positive. Therefore, it is recommended to move forward with the project.

1. The payback period refers to the time it takes for a project’s initial investment to be recouped. The payback period is calculated by adding up all cash flows that exceed \$900,000.

Year 1: \$120,000. Year 2: \$120,000 + \$155,000 = \$275

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