# 1. An investment carries a 6% return, compounded semi-annually. If 1,000 was invested at this rate for...

## Question:

2. An investment opportunity requires an outlay of £10,000. It will yield annual returns of £2,500 per annum for each of the next 5 years (in today's terms). If inflation is 2% and the money (nominal) cost of capital is 7.1%, the NPV of the investment is:

3. A project being considered by Tomcat plc is estimated to produce an initial cash flow of £1.2m in one year's time, based upon an initial investment of £3.2m. After the first year, the annual cash flows are expected to grow at the rate of 2.5% per annum, in perpetuity. What is the present value of this stream of future cash flows if the Tomcat plc has a cost of capital of 7%?

4. A project requires an outlay of £9m. It will yield annual returns of £425,000 per annum for each of the next 10 years (in today's terms). If inflation is 1.5% and the money (nominal) cost of capital is 6.575%, the NPV of the investment is:

**Related Book For**

## Fundamentals of Financial Management

ISBN: 978-0324597707

12th edition

Authors: Eugene F. Brigham, Joel F. Houston