Litchfield Design is planning to sell its San Francisco, Chicago, and Miami stores. The firm expects...

Litchfield Design is planning to sell its San Francisco, Chicago, and Miami stores. The firm expects to sell its Miami store for a cash flow of E dollars, its San Francisco store for a cash flow of E dollars, and its Chicago store for a cash flow of L dollars. The firm expects to sell its Miami store in P years, its San Francisco store in V years, and its Chicago store in V years. The cost of capital for all three stores is R. We know that L > E > 0, P > V > 0, and R > 0. The cash flows from the sales are the only cash flows associated with the various stores. Based on the information in the preceding paragraph, which one of the following assertions is true?

		None of the other assertions is true
		The Chicago store is the most valuable of the 3 stores
		Two of the three stores have equal value and those two stores are more valuable than the third store or all three stores have the same value
		The Miami store is the most valuable of the 3 stores
		The San Francisco store is the most valuable of the 3 stores

2.

Based on the information in the table, which one of the assertions is true?

Investment	Present value of expected cash flow	Expected cash flow	When expected cash flow is expected	Expected annual return
A	?	57,390 dollars	in 5 years	16.83 percent
B	?	74,066 dollars	in 12 years	8.92 percent
C	22,797 dollars	29,110 dollars	in 3 years	?
D	10,380 dollars	22,919 dollars	in 9 years	?

		Investment B is more valuable than investment A and investment D is riskier than investment C
		Investment B is more valuable than investment A and investment C is riskier than investment D
		Investment A is more valuable than investment B and investment D is riskier than investment C
		Investment A is more valuable than investment B and investment C is riskier than investment D

3.Sasha owns two investments, A and B, that have a combined total value of 44,700 dollars. Investment A is expected to pay 22,900 dollars in 1 year(s) from today and has an expected return of 14.34 percent per year. Investment B is expected to pay 57,969 in 8 years from today and has an expected return of R per year. What is R, the expected annual return for investment B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Expert Solution

jeff jeffy answered 2 years ago

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