Never round intermediary steps (or keep at least 4 decimal places), SHOW ALL WORK, and LABEL your answers.

Problem #1: Calculating Present Value for Multiple Cash Flows

Your company has identified an investment project with the following cash flows (hint calculator starts with cfO):

Year. | Cash Flow

(1). $11,900

(2). $10,900

(3). $15,400

(4). $19,000

(5). $19,800

(6). $21,500

A. If your company requires a 10% discount rate, what is the present value of these cash flows?

B. If your company requires a 18% discount rate, what is the present value of these cash flows?

C. If your company requires a 5% discount rate, what is the present value of these cash flows?

Problem #2: Calculating Perpetuity Values

Bartholow Life Insurance and Wealth Planning Company is trying to sell you an investment policy that will pay you and your heirs a salary every year

forever.

Hint: PV = Annual Cash / rate

A. Your family wants to receive $42,000 per year. If the company is able to return 6.7%, how much will you pay for the policy?

B. Your family wants to create a $630,000 trust for you and your heirs and the Bartholow Life company can guarantee 9% per year return into perpetuity.