1 - The management of KADJI expects to receive cash revenues of $120m, $180m and $300m four, five and six years from now, respectively.KADJI can earn an annual return of 5%, compounded annually, on money invested today.

What is the present value of this cash stream now, in millions?

2 - KD CORP has outstanding preferred stock which pays an annual dividend of $1.575.Assume that KDC has just paid its annual dividend and that KDC remains in business into perpetuity.You can earn an annual return of 6.225%, compounded annually, on money invested today.

What is the value of one share of KDC preferred now?

3 - You are considering buying land near HANOI.Once bought, you could divide the land into two lots. You estimate could sell one lot two years from now for $550,000 and the other lot 4 years from now for $750,000. You can earn an annual return of 12%, compounded annually, on money invested today in other real estate ventures.

What is the most you should pay for the land today?

4 - SUCES INC is analyzing a new project.Management expects to spend $10m on new equipment three years from now and to receive cash benefits in years 4, 5, 6, and 7 of $5m, $5m, $5m and $8m, respectively.SUCES INC can earn an annual return of 6%, compounded annually, on money invested today in similar projects.

What is the present value of this stream today, in millions of dollars?

Answer rating: 100% (QA)

1 To calculate the present value of the cash stream we need to discount each cash flow to its present value and then sum them up The cash flows are as ... View the full answer