Question 1 until Question 4.

Question 1 Your grandmother has been putting $1000 into a savings account on every birthday since your first (i.e. when you turned one). The account pays an interest rate of 3%. How much money will be in the account immediately after your grandmother makes the deposit on your 18th birthday? Question 2 Consider a business project that generates a stream of cash flows of $600 every year. Assume that the appropriate discount rate to evaluate the cash flows of this project is 16%. a) What is the present value of the project if it will generate a yearly $600 forever? b) What is the present value of the project if it will generate a yearly $600 for the next 10 years and then ends? c) What is the present value of the project if it will generate a yearly $600 for the next 25 years and then ends? Question 3 The interest rate is 10% p.a. What is the present value of a stream of five annual payments of $50 each, if... a) the first payment is received three years from now? b) the first payment is received today? Question 4 Your client is interested in buying a small company that has fairly reliable cash flows in the future. The projected cash flows are as follows. What is the maximum price that your client should pay for this company if the appropriate discount rate for evaluating this type of company is 12%? YEAR NET CASH INFLOW 1 2-5 $20,000 $30,000 $50,000 6-infinity