Using the information in the accompanying table, answer the questions that follow. Assume all transactions take place
Question:
Using the information in the accompanying table, answer the questions that follow. Assume all transactions take place at the end of the year.
a. Using a discount rate of 7%, determine the present value of the cash flows.
b. Suppose you had a lump sum equal to your answer in part a. You invested this sum in an account earning a 7% return each year. How much would you have after 6 years?
c. Calculate the future value of cash flows 6 years from now and compare it to your answer in part b.
d. How much would you be willing to pay for this, assuming that you can earn 7%
on your investments?
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