Question

A project generates a cash flow of $497,400.00 per year (end of year cash flows). If...

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:

Year Cash Flows
1 $13,600.00
2 $27,200.00
3 $44,000.00
4 $42,700.00

The discount rate is 10.00 percent. What is the investment's future value at the end of the fourth year?

Homework Answers

Answer #1

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

Where,

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

= 8.559475

So, Present value

= Annual payments x Annuity Factor

= $ 497,400 x 8.559475

= $4,257,482.86

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $575              2   975              3 1,075              4     1,400              a. If the discount rate is 9 percent, what is the future value of these cash flows in year 4?        b. What is the future value at a discount rate of 17 percent?        c. What is the future value at discount rate of 28 percent?       
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $675 2 800 3 1,100 4 1,425 a. If the discount rate is 12 percent, what is the future value of these cash flows in year 4? b. What is the future value at a discount rate of 20 percent? c. What is the future value at discount rate of 29 percent?
Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...
Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $625 2 $975 3 $1,100 4 $1,450 Required: (a) If the discount rate is 10 percent, what is the future value of these cash flows in year 4? (b) What is the future value at a discount rate of 20 percent? (c) What is the future value at discount rate of 28 percent?
1. Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow...
1. Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $625              2   950              3 1,125              4     1,400              Required: (a) If the discount rate is 10 percent, what is the future value of these cash flows in year 4?        (b) What is the future value at a discount rate of 17 percent?        (c) What is the future value at discount rate of 26 percent?
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $600              2   875              3 1,100              4     1,350              a. If the discount rate is 11 percent, what is the future value of these cash flows in year 4?        b. What is the future value at a discount rate of 20 percent?        c. What is the future value at discount rate of 30 percent?        Next Visit question map Question27of30Total27...
Maytag Corporation is considering an investment project that generates a cash flow of $65,000 next year...
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...
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...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $ 1,090 2 1,320 3 1,540 4 2,280 a. If the discount rate is 7 percent, what is the future value of these cash flows in Year 4?(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the discount rate is 13 percent, what is the future value of these cash flows in Year 4? (Do not...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $1070 2 $1300 3 $1520 4 $2260 a. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the discount rate is 11 percent, what is the future value of these cash flows in Year 4? (Do not...
(1)A firm undertakes a five-year project that requires an initial capital investment of $100,000. The project...
(1)A firm undertakes a five-year project that requires an initial capital investment of $100,000. The project is then expected to provide cash flow of $12,000 per year for the first two years, $50,000 in the third and fourth years, and $10,000 in the fifth year. The project has an end-of-life salvage value of $5,000. If the discount rate applied to these cash flows is 9.50 percent, to the nearest dollar, the net present value of this project is _____? (2)The...