2) An investment is expected to generate $150,000 of cashflow for each of the next four...

 

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2) An investment is expected to generate $150,000 of cashflow for each of the next four years. Using a 6% discount rate (interest rate) what is the present value of the cashflow? 3) You have won the lottery! You are given the option to receive a lump of $100,000 today or receive $8,000 for the 15 years. Using a 5% discount rate, what is the present value of each option? Based on the present value which is best option to take? Why? 4) Your company is evaluating the purchase of equipment that will cost $$60,000. The equipment has a useful life of three years and is expected to generate cashflow in year 1 of $14,000, in year 2 of $25,000, and Year 3 of $29,000. Using a discount rate what is the net present value (NPV) of the future cashflows? What is the NPV of the proposed project? Based on the NPV of the proposed project should your firm proceed with e project? Why? (Hint: See the Excel practice worksheet to see how to approach this problem). 5) What is the value of a preferred stock that pays a perpetual dividend of $85 at the end of each year using an interest rate of 4%? 2) An investment is expected to generate $150,000 of cashflow for each of the next four years. Using a 6% discount rate (interest rate) what is the present value of the cashflow? 3) You have won the lottery! You are given the option to receive a lump of $100,000 today or receive $8,000 for the 15 years. Using a 5% discount rate, what is the present value of each option? Based on the present value which is best option to take? Why? 4) Your company is evaluating the purchase of equipment that will cost $$60,000. The equipment has a useful life of three years and is expected to generate cashflow in year 1 of $14,000, in year 2 of $25,000, and Year 3 of $29,000. Using a discount rate what is the net present value (NPV) of the future cashflows? What is the NPV of the proposed project? Based on the NPV of the proposed project should your firm proceed with e project? Why? (Hint: See the Excel practice worksheet to see how to approach this problem). 5) What is the value of a preferred stock that pays a perpetual dividend of $85 at the end of each year using an interest rate of 4%?

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2 To calculate the present value of the cash flows which are 150000 for each of the next four years we can use the formula for present value of an ann... View the full answer