Question 6

Next year you will begin receiving $173 per year in perpetuity from a family trust fund (first payment is exactly 1 year from today). You have decided to discount these cash flows at a constant interest rate of 5.8%. What is the present value today of these future cash flows? (Hint: draw a time line to illustrate exactly the cash flows for this problem.) Answer to 2 decimal places.

Question 7

What is the PV of a 13-year annuity due (payments at beginning of period, aka annuity in advance) of $681 if the required return is 10.3%Answer to 2 decimal places.

Question 8

In 10 years you will begin receiving $179 per year in perpetuity from a family trust fund (first payment is exactly 10 years from today). You have decided to discount these cash flows at a constant interest rate of 6.5%. What is the present value today of these future cash flows? (Hint: draw a time line to illustrate exactly the cash flows for this problem.) Answer to 2 decimal places.

Question 9

How long does it take a present value amount to triple if the expected return is 9.1%?Answer to 2 decimal points.

Question 10

Your salary next year is expected to be $40,000. Assume you expect your salary to grow at a steady rate of 4% per year for another 21 years. If the appropriate cost of capital (aka discount rate) is 11%, what is the PV today of your future salary cash flow stream? For simplicity, assume the salary amounts are at the end of each of the next 21 years.Answer to zero (0) decimal places.