Chapter 5: 1, 4, and 12

1: Present Value and Multiple Cash Flows. Rooster Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18 percent? At 24 percent?

Year 1830

Year 2610

Year 31140

Year 41390

4: Calculating Annuity Present Values. An investment offers $6,700 per year for 15 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever?

12: Find the EAR in each of the following cases:

Stated Rate APR Number of times compounded Effective Rate (EAR)

10% Quarterly

17% Monthly

13% Daily

9% Semiannually