You are looking at investing in a new investment product which will generate cash flows of...

You are looking at investing in a new investment product which will generate cash flows of $2,000 next year and the cash flows will grow by 5% per year. You will receive payments for the following 6 years (a total of 6 payments including the first payment of $2,000 next year). If the appropriate discount rate to evaluate the product is 4%, how much is the investment product worth to you today?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

18. You are considering investing in a small business that would generate the following cash flows:...

18. You are considering investing in a small business that would generate the following cash flows: year 1 = 60,000 (loss) year 2 = 75,000 (loss) year 3 = +$100,000 year 4 = +$150,000 The ownership position would cost you $1,800,000 up front but you think you can sell it for $2,550,000 after 4 years. Your investment hurdle rate for this kind of investment is 10%. Which of the following is accurate and appropriate when looking at this opportunity from...

You are considering investing RM70000 in new equipment. You estimate that the net cash flows will...

You are considering investing RM70000 in new equipment. You estimate that the net cash flows will be RM14000 during the first year, but will increase by RM2500 per year the next year and each year thereafter. The equipment is estimated to have a 11-year service life and a net salvage value of RM4600 at that time. Assume MARR of 8%. Answers a.Calculate the annual capital cost CR (ownership cost) for the equipment. b.Determine the equivalent annual savings. c.Is this a...

You are considering investing RM70000 in new equipment. You estimate that the net cash flows will...

You are considering investing RM70000 in new equipment. You estimate that the net cash flows will be RM14000 during the first year, but will increase by RM2500 per year the next year and each year thereafter. The equipment is estimated to have a 11-year service life and a net salvage value of RM4600 at that time. Assume MARR of 8%. a.Calculate the annual capital cost CR (ownership cost) for the equipment. b.Determine the equivalent annual savings. c.Is this a wise...

•You are looking at a new project and you have estimated the following cash flows: Year...

•You are looking at a new project and you have estimated the following cash flows: Year 0: CF = -$150,000 Year 1-2: CF = $80,000 Year 3-4: CF = $50,000 Year 5-6: CF = $30,000 Year 7: CF = -$180,000 Your cost of capital is 10% Please calculate NPV and IRR, and decide whether we should take this project?

An investment is expected to generate annual cash flows forever. The first annual cash flow is...

An investment is expected to generate annual cash flows forever. The first annual cash flow is expected in 1 year and all subsequent annual cash flows are expected to grow at a constant rate annually. We know that the cash flow expected in 3 years from today is expected to be $9,000 and the cash flow expected in 7 years from today is expected to be $10,000. What is the cash flow expected to be in 5 years from today?

An investment is expected to generate annual cash flows forever. The first annual cash flow is...

An investment is expected to generate annual cash flows forever. The first annual cash flow is expected in 1 year and all subsequent annual cash flows are expected to grow at a constant rate annually. We know that the cash flow expected in 2 year(s) from today is expected to be 1,860 dollars and the cash flow expected in 8 years from today is expected to be 3,140 dollars. What is the cash flow expected to be in 5 years...

A young engineer is evaluating a 5-year investment, by looking at the cash flows at the...

A young engineer is evaluating a 5-year investment, by looking at the cash flows at the end of each year. The capital cost of the project is considered as occurring at the end of a hypothetical year, 0. The project has no start-up revenue, but requires a start-up capital cost of $50,000. The project promises revenues of $0, $20,000; $30,000; $40,000; $50,000, and $100,000; at the end of years 0, 1, 2, 3, 4, and 5, respectively. In addition to...

LM Company is considering investing in a new project that will generate cash inflows of $45,000...

LM Company is considering investing in a new project that will generate cash inflows of $45,000 every year for the ten-year life of the project. Investing in this new project will require the purchase of a new machine, which will cost $200,000. The machine will have a salvage value of $15,000 at the end of ten years, but will require a repair costing $6,000 at the end of year four and a repair costing $10,000 at the end of year...

LM Company is considering investing in a new project that will generate cash inflows of $45,000...

Burger Inc., is looking at a new project that will generate $312 000 in operating cash...

Burger Inc., is looking at a new project that will generate $312 000 in operating cash flows every year for four years. The project requires an investment in a system with an installment cost of $984 000 that will be depreciated straight-line to zero over the project’s four-year life. At the end of the project the system can be sold for $158 000. The system requires an initial investment in net working capital of $28 000 that will be recovered...

Subjects