tvm 2 day hogan - Lecture Problem Solutions Time Value of...

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Unformatted text preview: Lecture Problem Solutions Time Value of Money Day 3 1. How much is a building worth that is expected to produce cash flows of $200,000 in 1 year and $500,000 in 2 years if the cost of capital is 10%? S°°k D +$ A 2“"- F00 7. PVC“ f \ \ICZ o ( .2 6 fd - Ci 2 290,000: i(8/?l€./Yl3 " Y“ ‘1 C\ ’ (lfr)‘ (p+0.lo\‘ ’ ?\]< -.. C2 __ Sooloob > ‘4‘; 2‘23 (965 2. l . CW {)1 (\ 1mm)-L ?\L : ?U(‘*?VC1=/gll 8(8_(9/f {- 7,32%Z3. [(105 2 [3 575,0‘413223! 2. Suppose a building has a current value of $500,000 and is expected to produce positive cash flows at the end of years 1 and 2. How much cash flow is the building expected to produce in 2 years if it is expected to produce cash flows of $200,000 in 1 year and has a cost of capital of 10%? +3 ¢z=? Z Q‘Ys ‘W SOlV5.‘ t (9 not rm 5» ere-«C zoo q+ t'Z. 71cm Sub'tracl' '(‘° RAJ CZ: Fin-nu "‘ F“C‘ "i ’5‘“ © F‘wl 1’0 .5? Zoo 4% 2+ t‘O. sub‘tr‘c'k' ‘l’o $.49 FdC, - 500 —?\’c. . T14“ so‘ve 'GO" C1 = FichCl'W‘Bt, \ i K G f\L[“‘\—. SWCl+O.lo)z L ?\]C‘ -: th—ffi—S‘ : [8|‘%i?.l%‘8 ?0Tnal 1" PUC‘ * ?\)<_2 a F“Cz 3 FUTn-A — 'PVCa Soo‘ooo—IBIflI‘BJBw = (905K (NC . ZoonCHOAQ‘ : 210K ‘ - ‘313IWI. 3/82 C 2. : '€U(1 4110*: 3|8l$l XCH'O-I‘Dt =1“ 325902)] \ L331; fth . (6“rC-i. L—e-w C7, ‘ FUTWA -' F99 You own a building that is expected to make annual cash flows forever. 1. What is the value of the building if the cost of capital is 8.0% and annual cash flows of $500,000 are expected with the first one in 1 year? c Sootooa .— g E: ,(L: 1 0.0? —W 2. What is the value of the building if the cost of capital is 8.3% and annual cash flows are expected to grow by 2.3% per year forever with the first one expected to be $500,000 in 1 e ‘7 Cl Soolaoo $1 %‘333,333-§ -. K, 3 (r’a) - (o_o<5‘$—0,0L‘>> 3. If the building is worth $2,300,000, the cost of capital is 5%, and annual fixed cash flows are expected with the first one due in one year, what is the amount of the annual cash flows produced by the building expected to be? C» V0: ‘7‘”? C\:?°Kr C, .g 2.300.000 x 0.05 7' L$ HSIOOO You own a building .hat is expected to make annual cash flows forever. 4. If the building is worth $2,300,000, the cost of capital is 5%, and annual cash flows are expected with the first one due in one year and all subsequent ones grong annually by 2.2%, then what is the amount of the cash flow produced by the building in 1 year expected to be? R» ”' c7733 ‘9 C7 fix“? Ck 7 ZIZoO/oco K (0.05 —o.OZ?,) 5. If the building is worth $2,300,000, the cost of capital is 5%, and annual cash flows are expected with the first one due in one year and all subsequent ones growing annually by 2.2%, then what is the amount of the cash flow produced by the building in 3 years expected to be? an W [er‘ we “vegan, few! c, a we 3 'l [0.8T (/OLLCM . 1'? we. L<onJ Tlaficf‘ CB : C\O+g> Cask £Lbd$ grad 4"? 'HA-c confi‘ilw‘l Yaft. a": 2.7.1] {Lean 94c am. 2 (Oct/«400 ((‘t 0.02» use ’(‘Le Cémefij [wt-erud— ‘Fofmulq f0 ‘QV‘vJ 1442- Cask £269) in 3 yea/S col/x“: 30’: C FW€C3J “J (=7_ ‘ ) ...
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