Question

Cara owns a(n) bowling alley that is worth 31,914 dollars and is expected to make annual cash flows forever. The cost of capital for the bowling alley is 19.6 percent. The next annual cash flow is expected in 1 year and is expected to be 5,170 dollars. All subsequent cash flows are expected to grow annually at a constant growth rate. What is the cash flow produced by the bowling alley in 4 years expected to be?

Oxygen Optimization just bought a new filtration system for 189,000 dollars. To pay for the filtration system, the company took out a loan that requires Oxygen Optimization to pay the bank a special payment of 110,200 dollars in 3 year(s) and also make regular annual payments forever. The first regular payment is expected in 1 year and is expected to be 1,500 dollars. All subsequent regular payments are expected to increase by a constant rate each year forever. The interest rate on the loan is 16.39 percent per year. What is the annual growth rate of the regular payments expected to be? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer 1