Question

An investment that generates a series of uniform and equal cash amounts is referred as

A.net present value.

B.future value.

C.cash flow.

D.an annuity.

Answer #1

The correct option is **:** **an
annuity**

An annuity is equal series of payments over a fixed period of time at a specified interest rate where:

Present value of annuity=Annuity[1-(1+interest rate)^-time
period]/rate

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

Also;

NPV=Present value of inflows-Present value of outflows

where

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

Cash flow means cash generated by the firm through sale of fixed asset,equipment etc and can happen for a single event/series of events and hence can not be necessarily termed as an annuity cash flow

Also a future value can be discounted to the present value using discounting rate such as :

Present value=Future value*Present value of discounting factor(rate%,time period)

Determine the uniform series of payments that correspond to each
condition and sketch a cash flow diagram.
A present worth of $500 with an interest rate of 10% and
payments in periods 1 through 5.
A future value of $2000 in period 10 with an interest rate of
12% and payments in periods 1-10.
A future value of $5000 in period 10 with an interest rate of
5% and payments only in periods 1-8.

A 5-year project requires an initial
investment of $28 million. It generates an annual cash
flow of $9 million. The unlevered cost of equity is
20%. A loan of $22.5 million at a rate of
10%. Principal will be repaid in a lump sum when project
ends. However, the lender will extend the loan for only
three years. The firm’s tax rate is
30%. Calculate the project’s adjusted present
value.

1. An investment of $83 generates after-tax cash flows of $50.00
in Year 1, $74.00 in Year 2, and $135.00 in Year 3. The required
rate of return is 20 percent. What is the net present value?

An arithmetic cash flow gradient series equals $800 in year 1,
$900 in year 2, and amounts increasing by $100 per year through
year 9. At i = 7% per year, determine the present worth of
the cash flow series in year 0.
The present worth of the cash flow series in year 0 is

An arithmetic cash flow gradient series equals $400 in year 1,
$500 in year 2, and amounts increasing by $100 per year through
year 10. At i = 9% per year, determine the present worth of the
cash flow series in year 0. The present worth of the cash flow
series in year 0 is $ .?

suppose a condo generates $20000 in the first year. if the cash
flow grows at 5% per year, the interest rate is 8%, and the
building will be sold at the end of 18 yrs with a value of $80000.
what is the present value of the condo's cash flow?

an investment pays $20 at the beginning of each month. What kind
of cash flow stream can this be?
options:
- ordinary annuity
- annuity
- perpetuity
- present value
- annuity due or perpetuity
sorry, this is just a theory question... thank you

You have just purchased an investment that generates the
following cash flows for the next four years. You are able to
reinvest these cash flows at 11.9 percent, compounded annually.
End of year
1. $2,335
2. $916
3. $4,996
4. $3,400
What is the present value of this investment if 11.9 percent per
year is the appropriate discount rate?
Round the answer to two decimal places. Thank you.

Maytag Corporation is considering an investment project that
generates a cash flow of $65,000 next year if the economy is
favorable but generates only $27,000 if the economy is unfavorable.
The probability of favorable economy is 50% and of unfavorable
economy is 50%. The project will last only one year and be closed
after that. The cost of investment is $47,000 and Maytag
Corporation plans to finance the project with $12,000 of equity and
$35,000 of debt. Assuming the discount...

Genworth Company is considering an investment project that
generates a cash flow of $850,000 next year if the economy is
favorable but generates only $320,000 if the economy is
unfavorable. The probability of favorable economy is 60% and of
unfavorable economy is 40%. The project will last only one year and
be closed after that. The cost of investment is $600,000 and
Genworth Company plans to finance the project with $220,000 of
equity and $380,000 of debt. Assuming the discount...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 44 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago