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# 002 - 190 P A n'r 3 Valuation of Future Cash Flows 3 4U 11...

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Unformatted text preview: 190 P A n 'r 3 Valuation of Future Cash Flows 3.- 4U 11! 12. Future Vaiue and Multiple Cash Flows. Brick ‘11” Sticks has identiﬁed an investment project with the following cash ﬂows. If the discount rate is 8"percent, what is the future value of these cash ﬂows in Year 4? What is the future Value at an interest rate of 11 percent? At 24 percent? I Calculating Annuity Present Values. An investment offers \$8,500 per year for '15 years, with the ﬁrst payment occurring 1 year from now. If the "required return is 9 percent, what Is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever? ' caleuiating Annuity Cash Fiowst If you put up \$25,000 today in exchange for a 7.9 percent, 12-year annuity, what will the annual cash ﬂow be? calculating Annuity Vaiues-. Your company will generate \$45,000 in cash ﬂow each year for the next nine years from a new information database. The computer system needed to set up thedatabase costs \$260,000. If you can borrow the money to buy the computer system at 8.25 percent annual interest, can you afford the new system? calculating Annuity Waitressu if you deposit \$4,000 at the end of each of the next 20 years into an account paying 9.5 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 50 years? Calculating Annuity Values. Youwant to have \$25,000 in your savings ' account eight years from now, and you’re prepared to make equal annual deposits into the acc0unt at the end of each year. If the account pays 7.45 percent. interest, What amount must you deposit each year? Calculating Annuity Values. Bath’s Bank offers you a \$60,000, seven—year term loan at 9 percent annual interest, What will your annual loan payment be? Calcufating Perpetuity Vatues. Dawa Financial is trying to sell you an investment poiicy that will pay you and your heirs \$35, 000 per year forever. If the required return on this investment is 7 percent, how much will you pay for the policy? Calculating Perpetuity Values. In the previous problem, suppose Dawa told you the policy costs \$610, 000 At what interest rate would this be a fair deal? .Gatculating EAR. Find the EAR 1n each of the following cases: her ":‘nnesffibompoundeﬁ:.21.: 8% Quarterly 18 Monthly 14 Daily 12 Semiannually ...
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