A project generates a cash flow of $497,400.00 per year (end of year cash flows). If the project can last 15.00 more years, what is its value TODAY of the remaining cash flows if the cost of capital is 8.00%?
A real estate investment has the following expected cash flows:
The discount rate is 10.00 percent. What is the investment's future value at the end of the fourth year?
Dear student, only one question is allowed at a time. I am answering the first question
Since the cash flows are equal, annuity factor will be used to calculate the present value of all future cash flows:
Annuity factor of 8% for 15 years
= [1 – (1 + r) ^ -n] / r
r = Rate of interest = 8% or 0.08
n = Years = 15
So, Annuity Factor
= [ 1 – (1.08^-15] / 0.08
= [1 - 0.315242] / 0.08
So, Present value
= Annual payments x Annuity Factor
= $ 497,400 x 8.559475
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