Part 1. You are offered an investment which will pay you $300 in 1 year, $350...

Part 1. You are offered an investment which will pay you $300 in 1 year, $350 in 2 years, $350 in 3 years and $300 in 4 years. Your required rate of return is 9%. What is the most that you should be willing to pay for the investment?

Part 2. Calculate the value of the stream of cash flows below in Year 3.

t=0--->CF0 = $450

t=1--->CF1 = $550

t=2--->CF2 = $650

t=3--->CF3 = $750

t=4--->CF4 = $850

The relevant rate is 9%. (Enter only numbers and decimals in your response. Round to 2 decimal places.)

Expert Solution

Part 1:
PV = 300/1.09+350/1.09^2+350/1.09^3+300/1.09^4 =	$ 1,052.61
Part 2:
Note:
The question is silent on whehter it is value at the
beginning of year 3 or end of year 3.
If it is beginning of year 3, value = 4501.09^2+5501.09+650+750/1.09+850/1.09^2 =	$ 3,187.65
If it is end of year 3, value = 4501.09^3+5501.09^2+650*1.09+750+850/1.09 =	$ 3,474.53

jeff jeffy answered 2 years ago

You are offered an investment that will pay you $150 at the end of year one,...

You are offered an investment that will pay you $150 at the end of year one, $250 at the end of year four, and $800 at the end of year eight. What is the total present value of these three cash flows if the discount rate is 6%?

Assume you are offered an investment that will pay you $3,000 at time 0. For year...

Assume you are offered an investment that will pay you $3,000 at time 0. For year 1 the cash inflow will be $1,000 and then will decline at a rate of 20% per year for 30 years, that is, each year after year 1 will be 80% of the prior year through 30 years. If the required rate of return is 14%, what is the value of this stream of cash flows, including the value received today? Use equations or...

You are offered an annuity investment that will pay you $ 25,000 per year for 10...

You are offered an annuity investment that will pay you $ 25,000 per year for 10 years beginning in 20 years. These payments will be made at the beginning of each year and your discount rate is expected to be 8%. You will need to make payments at the end of each year for the next 20 years (also at 8%) in order to receive the annuity investment. What is the present value of the annuity investment as of...

Suppose that you are offered an investment at cost of 800. That investment will pay the...

Suppose that you are offered an investment at cost of 800. That investment will pay the following cash flows. 0. 1. 2. 3. 4. 5 0. 500. 400. 300. 200. 100 A) should you make the investment if the required rate of return is 12% per year? why? explain. B) What is the internal rate of return of this cash flow stream? if you require a rate of return of 12% annually. Should you make the investment? Why? explain.

you are offered an investment that promises to pay you $1.20 one year from today, $1.12...

you are offered an investment that promises to pay you $1.20 one year from today, $1.12 a year for the following two years, and then a final payment of $14.20 four years from now. What is the most you would pay for this investment today if you require a rate of return of 18.7%?

Suppose that you are offered an investment that will cost $898 and will pay you interest...

Suppose that you are offered an investment that will cost $898 and will pay you interest of $70 per year for the next 20 years. Furthermore, at the end of the 20 years, the investment will pay $1,000. If you purchase this investment, what is your compound annual rate of return?

You are offered an investment with returns of $ 1,857 in year 1, $ 3,732 in...

You are offered an investment with returns of $ 1,857 in year 1, $ 3,732 in year 2, and $ 4,485 in year 3. The investment will cost you $ 8,615 today. If the appropriate Cost of Capital (quoted interest rate) is 12.5 %, what is the Net present Value of the investment? Enter your answer to the nearest $.01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

You are offered an investment with returns of $ 1,758 in year 1, $ 3,380 in...

You are offered an investment with returns of $ 1,758 in year 1, $ 3,380 in year 2, and $ 3,106 in year 3. The investment will cost you $ 7,198 today. If the appropriate Cost of Capital (quoted interest rate) is 6.1 %, what is the Net present Value of the investment? Enter your answer to the nearest $.01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

You are offered an investment with returns of $ 2,757 in year 1, $ 4,958 in...

You are offered an investment with returns of $ 2,757 in year 1, $ 4,958 in year 2, and $ 4,839 in year 3. The investment will cost you $ 6,064 today. If the appropriate Cost of Capital (quoted interest rate) is 12.2 %, what is the Profitability Index of the investment? Enter your answer to the nearest .01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

You are offered an investment with returns of $ 1,752 in year 1, $ 4,823 in...

You are offered an investment with returns of $ 1,752 in year 1, $ 4,823 in year 2, and $ 5,748 in year 3. The investment will cost you $ 6,757 today. If the appropriate Cost of Capital (quoted interest rate) is 7.9 %, what is the Profitability Index of the investment? Enter your answer to the nearest .01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

Question