Ginny

Ginnys Restaaurant

Question 1

A

What is Virginia's current wealth

Cash flow today 2,000,000.00 2,000,000.00

Cash flow 1 3,000,000.00 2,380,188.68

current weatlh 4,830,188.68

current wealth

B

How much money can she spend today 2,000,000.00

she can spend and consume.

C

How much can she spend and consume 1 year from today if she consumes nothing today.

- calculate the future value of 2M in one year

future value + cash flow 2,120,000.00

3,000,000.00

Total 5,120,000.00

Questions 2.

A B C D B+D

Investment Future cash flow from Investment (Bank) Future value of Total Future value of the

(Restaurant) investment (after 1 year) investment in Bank entire investment

Her current wealth is $4M $1,000,000.00 $1,800,000.00 $3,000,000.00 $3,180,000.00 $4,980,000.00

Her future weatlh is $5.460M $2,000,000.00 $3,300,000.00 $2,000,000.00 $2,120,000.00 $5,420,000.00

which means her present wealth is $3,000,000.00 $4,400,000.00 $1,000,000.00 $1,060,000.00 $5,460,000.00

$5,150,943.40 $4,000,000.00 $5,400,000.00 $0 $0 $5,400,000.00

Question 3.

Cash Flow 4,000,000.00

Money consumed (3,800,000.00)

cash flow remaining 200,000.00

Virginia will still have a positive wealth in that year with any of these investments. She could consume the 3.8M A B C D B-D

Investment Future cash flow from Borrow from bank Pay bank back Remaining Wealth

(Restaurant) investment (after 1 year) 6%

$1,000,000.00 $1,800,000.00 $800,000.00 $848,000.00 $952,000.00

$2,000,000.00 $3,300,000.00 $1,800,000.00 $1,908,000.00 $1,392,000.00

$3,000,000.00 $4,400,000.00 $2,800,000.00 $2,968,000.00 $1,432,000.00

$4,000,000.00 $5,400,000.00 $3,800,000 $4,028,000 $1,372,000.00

Question 4.

A (future calculator)

Bank Loan Payments 1 year 6%...