HomeworkLib
Question

QUESTION 1 The Lincoln’s are considering an investment that is expected to pay $750 per month...

QUESTION 1

The Lincoln’s are considering an investment that is expected to pay $750 per month for the next 10 years. If their required rate of return is 9.5 percent, how much is this investment worth to them today?   

$7,184

$57,961

$7,895

$1,932

QUESTION 2

Jefferson owns an investment that will pay $6,500 per year forever into the future. If his discount rate is 21 percent, how much is this investment worth to him today?

$30,952

$310

$26,351

$136,500

QUESTION

Washington is considering investing in a project that will generate a cash flow of $35,000 next year. This figure is expected to grow by 4 percent each year forever into the future. If Washington’s require rate of return on investments like this is 14 percent, how much should he be willing to pay for this project?  

$875,000

$565,500

$350,000

$250,000
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1


solution: Monthly interest rate Period in months-10*12 9.5%/12 Monthly payment x PVIFA(9.5%/12,120)* investment worth today 750 77.28121 57,961 **PVIFA(9,596/12,120) formula (1-140.095/12) .120)/(0095/12) 77.281211 02 PV of perpetual cash flow-annual cash flow/discount rate 6500/21% 30,952 аз PV of growing perpetual cash flow- cash flow next year/(discount rate-growth rate) 35000/(0.14-0.04) 350000 Sheet1 137 . Sheet1138 Sheet1 139 Sheed 140 Sheetl 141 Sheet1 142 Sheet1 143 | Sheet1144 18:06 ENG HUS 16/01/2019

0 0
Add a comment
Know the answer?
Add Answer to:
QUESTION 1 The Lincoln’s are considering an investment that is expected to pay $750 per month...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Tanner owns an investment that is expected to pay him 4,380 dollars per quarter forever with...

    Tanner owns an investment that is expected to pay him 4,380 dollars per quarter forever with the next payment of 4,380 dollars expected in 3 months from today. The investment has an annual return of 7.08 percent. What is the value of the investment? A movie is expected to produce cash flows of 15,800 dollars per month with the first monthly cash flow expected later today and the last monthly cash flow expected in 5 months from today. The cost...

  • Kristi is considering an investment that will pay $15,000 a year for 10 years, first payment...

    Kristi is considering an investment that will pay $15,000 a year for 10 years, first payment received one year from today. How much should she pay for this investment if she wishes to earn a 7 percent rate of return?

  • An investment, which is worth 26,400 dollars and has an expected return of 4.53 percent, is...

    An investment, which is worth 26,400 dollars and has an expected return of 4.53 percent, is expected to pay fixed annual cash flows forever with the next annual cash flow expected in 1 year. What is the present value of the annual cash flow that is expected in 7 years from today?

  • An investment, which is worth 30,300 dollars and has an expected return of 7.42 percent, is...

    An investment, which is worth 30,300 dollars and has an expected return of 7.42 percent, is expected to pay fixed annual cash flows forever with the next annual cash flow expected in 1 year. What is the present value of the annual cash flow that is expected in 7 years from today? Quantum Pizza took out a loan from the bank today for 24,500 dollars. The loan requires Quantum Pizza to make a special payment of 13,500 dollars to the...

  • Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and...

    Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 6.3% to all future cash flows? Your Answer: Answer Question 4 (1 point) Rockmont Recreation Inc. is considering a project that has the following cash flow and WACC (weighted average...

  • You are offered an investment that will pay you the following amounts $9979 today $2655 per...

    You are offered an investment that will pay you the following amounts $9979 today $2655 per year for the next 8 years $3359 per year for the following 2 years $5145 per year for the following 1 years $14572 per year for the final 2 years Assuming you earn a 4.2% rate of return during the entire period, how much is this investment worth TODAY? Round answer to the nearest dollar.

  • 5. A real estate investor is considering an investment in a building that will generate profits...

    5. A real estate investor is considering an investment in a building that will generate profits of $22,000 at the end of each year for the next 10 years. The investor requires a 22% return on the investment to compensate for the risk they are taking. a. How much should the investor pay today for the investment? b. How much should the investor pay today for the investment if profits at the then end of year 1 are $22,000, and...

  • 5.An investment will pay you $3,096 in 1 years if you pay $1,980 today. What is...

    5.An investment will pay you $3,096 in 1 years if you pay $1,980 today. What is the implied rate of return? (Convert to a decimale. Round to 2 decimal places.) 6.In 1998, the average price of a gallon of gas was $1.09. Today, the average price of a gallon of gas is $2.84. At what annual rate has a gallon of gas increased over the last 20 years? (Answer as a percent. Enter only numbers and decimals in your response....

  • False Question 3 (1 point) A firm is considering an investment project that costs $250,000 today...

    False Question 3 (1 point) A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 7.5% to all future cash flows? Your Answer: Answer Question 4 (1 point) The cash flows associated with an investment project are an immediate cost of $2400 and benefits...

  • A firm is considering an investment project that costs $250,000 today and $250,000 in one year,...

    A firm is considering an investment project that costs $250,000 today and $250,000 in one year, but would produce benefits of $50,000 a year, starting in one year, forever. What is the NPV of this investment project if the firm applies an annual discount rate of 7.1% to all future cash flows?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT