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Unformatted text preview: payment on the lease is due immediately, it is less expensive to buy the truck than to lease it. 49. If you live forever, you will receive a $100 perpetuity that has present value equal to: $100/r Therefore: $100/r = $2500 ⇒ r = 4 percent 52. PV of cash flows = ($120,000/1.12) + ($180,000/1.12 2 ) + ($300,000/1.12 3 ) = $464,171.83 This exceeds the cost of the factory, so the investment is attractive. 68. a.PV = $100/(1.08) 3 = $79.38 b. real value = $100/(1.03) 3 = $91.51 c.real interest rate = 1 rate inflation 1 rate interest nominal 1+ + = 0.04854 = 4.854% 41...
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This note was uploaded on 10/28/2010 for the course FIN 3300 taught by Professor Jerry during the Winter '10 term at CSU East Bay.
 Winter '10
 jerry
 Annuity

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