Question

What is the present value of the following stream of cash flows: 4,000 in one year, 8,000 in two years and 12,000 in three years if the discount rate is 10%? 19,264 21,455 23,565 25,439 QUESTION 8 What is the present value of a 5 period annuity of $3,000 if the interest rate is 12% and the first payment is in one period? 9,112 10,814 12,112 13,200 QUESTION 9 What is the value of a perpetuity that starts in one year, that pays $10 per year and has an interest rate of 10%? $80 $90 $100 $110

Answer 1

Question 7

Cash flow	pv factor @ 10 %	present value
4000	0.909	3636
8000	0.8264	6612
12000	0.7513	9016
	Total present value	19264

answer (A) is correct answer amounted 19264

Question 8

Anuually cash flow for continuous 5 years= $ 3000

Discount Rate = 12%

PV factor of 5 years@ 12 % = 3.6047

Present value= $3000*3.6047 = 10814.1

answer (B) is correct answer amounted 10814

Question 9

Value of perpetuity = Annual payment / discount rate

= $10/ 10% = $ 100

answer (c) is correct answer amount 100