8.00% For problems 5 & 6 use required nominal annual return of: S. Consider the following end-of-year cash flows: Cash flow Year INPUT DATA 0 1 $0.00 $40.00 $60.00 $60.00 2 3 Dalawa |Eanattirmation name 5.009 nominal interest rate nominal $5,000.0d Present wa Py 1.00 Total Number of years nper 1 # of compounding periods per pery payment PMT Future Value FV chainbat effect Net Present Value (NPV) 2. What is the present value of these cash flows in year oj? b. If the purchase price of this investment is $140 today, would you buy it? Why? Compare instrinsic value to actual price) What is the expected rate of return on this investment if the purchase price is $1402 Year Cash flow Internal Rate of Return (IRR) 0 $140.00 1 $40.00 2 $60.00 3 $60.00 d. Would you buy this investment based on your answer to partc and why? Compare expected return to required return). Present Value 6. Consider the present value of the following different investments. Recall the nominal rate 8.00% 2. What is the present value of $1,000,000, due 25 years from now? b. What is the present value of a $40,000 ordinary annuity for 25 years? (Hint: $40,000 is the payment)