For problems 5 & 6 use required nominal annual return of : 5.50% 5. Consider the following end-of-year cash flows: Year Cash flow 0 1 $30.00 $40.00 $60.00 $60.00 2 3 Net Present Value (NPV) a. What is the present value of these cash flows (in year 0)? $172.92 No because the intrinsic value is less than the actual price b. If the purchase price of this investment is $200 today, would you buy it? Why? (Compare instrinsic value to actual price) c. What is the expected rate of return on this investment if the purchase price is $200? Hint: Do not change the cash flows (Yr.O cash flow is already adjusted and is net of the purchase price and the $30 inflow). Year Cash flow Internal Rate of Return (IRR) -$170.00 $ $40.00 $60.00 $60.00 0 188.31 1 2 3 d. Would you buy this investment based on your answer to part c. and why? (Compare expected return to required return)