1. A project produces the following cash flows: Year Cash flow 432 2 137 797 If...

 

Transcribed Image Text:

1. A project produces the following cash flows: Year Cash flow 432 2 137 797 If the cost capital is 15 percent, what is the project's present value? 2. Harold fibert is 30 years of age and his salary next year will be $20,000. Harold forecasts that his salary will increase at a steady rate of 5 percent per annum until his retirement at age 60. (a) If the discount rate is 8 percent, what is the present value of these future salary payments? (b) If Harold saves 5 percent of his salary each year and invests these savings at an interest rate of 8 percent, how much will he have saved by age 60? (e) If Harold plans to spend these savings in even amounts over the subsequent 20 years, how much can be spend each year? (Suppose: the interest rate is 8 percent over the subsequent 20 years.) 1. A project produces the following cash flows: Year Cash flow 432 2 137 797 If the cost capital is 15 percent, what is the project's present value? 2. Harold fibert is 30 years of age and his salary next year will be $20,000. Harold forecasts that his salary will increase at a steady rate of 5 percent per annum until his retirement at age 60. (a) If the discount rate is 8 percent, what is the present value of these future salary payments? (b) If Harold saves 5 percent of his salary each year and invests these savings at an interest rate of 8 percent, how much will he have saved by age 60? (e) If Harold plans to spend these savings in even amounts over the subsequent 20 years, how much can be spend each year? (Suppose: the interest rate is 8 percent over the subsequent 20 years.)

Answer rating: 100% (QA)

Answer 1 Calculation of projects present value Year Cash flow Discount f... View the full answer