Question

Consider an investment that will pay you $3,000 per month for each of the next 3 years, and then $5,000 per month in the following 5 years.

If your required rate of return on this investment is 18 percent per year, what is the most you would be willing to pay for it?

NOTE: Your cash flow worksheet does
NOT incorporate the P/Y setting.Thus, you must use
*periodic* interest rates when calculating the NPV with
irregular cash flows.

Suppose you can purchase this investment for $150,000. What is its net present value? Should you purchase this investment?

Answer #1

You are considering the purchase of an investment that would pay
you $5,000 per year for Years 1‑5, $3,000 per year for Years 6‑8,
and $2,000 per year for Years 9 and 10. If you require a 16 percent
rate of return, and the cash flows occur at the end of each year,
then what is the MOST you would be willing to pay for this
investment? Answer to 0 decimal places.

You are considering the purchase of an investment that would pay
you $10,000 per year for Years 1
and 2, $8,000 per year for Years 3 and 4, and $6,000 per year for
Years 5 and 6. If you require a 15 percent
rate of return, and the cash flows occur at the end of each year,
how much would you be willing to pay for
this investment? In other words, what is the NPV of these cash
flows?
a....

An investment promises to pay $5,000 at the end of each year for
the next 7 years, $9,000 at the end of each year for years 8
through 20, and $3,000 at the end of each year for years 21 through
35. If you require a 10% annual rate of return on this investment,
what is the present value of these cash flows at a 10% annual rate
of return? Show time value of money equation and
work.

You are considering the purchase of an investment that would pay
you
$12,000 per year for Years 1 and 2, $22,000 per year for Years 3
and 4,
and $8,000 per year for Years 5 and 6. If you require a 14
percent
rate of return, and the cash flows occur at the end of each year,
how
much would you be willing to pay for this investment?

You expect to be paid $5,000 per month for the next 6 years with
the first cash flow starting in 1 month. Assuming an annualized APR
(AEY) of 9%, what is the present value of these cash flows to the
nearest dollar?
A) 237,598
B) 240,867
C) 242,856
D) 269,155
E) None of the above

Wedge Investment Group has suggested an investment that will pay
you $600 per quarter in each of the next 6 years. At the end of
that time, it will pay you an additional $25,000. a) If this
investment costs you $20,000, what is its internal rate of return?
b) If your required rate of return on this investment is 16
percent, what is its NPV assuming the same $20,000 purchase
price?

You are offered an investment that will pay you $1,721 per month
for next 16 years. Assuming you want to earn an 5.04% rate of
return, what is this investment worth today? Round to the nearest
cent.

How much would you be willing to pay today for an investment
that pays the following cash flows at the end of each of the next 4
years if your required rate of return is 9% per year?
Period Cash
Flow
0
$0
1
$100
2
$200
3
$300
4
$400

You are considering between 2 investments: A and B. Investment A
will pay you $100 per year forever with the first cash flow
occurring 11 years from today. Investment B will pay you $90 per
year forever with the first cash flow also occurring 11 years from
today; however, the cash flow amounts are expected to grow at 1%
forever. Assume interest rates are expected to be 6.125% every year
forever
1. What is investment A worth today
2. What...

An investment offers to pay you $5,000 bimonthly for the next 15
years (the payments start a month after you purchase the
investment). If the interest rate is 6%, how much should you pay
for this investment?

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