Question

Consider a project with the following cash flows: Year 0: Cash flow = $500 Year 1:...

Consider a project with the following cash flows:

Year 0: Cash flow = $500

Year 1: Cash flow = $0

Year 2: Cash flow = -$500

If the current market rate of interest is 8% per year, compounded annually, what is the value of this stream of cash flows expressed in terms of dollars at year 1?  (Note: This does not ask for the value as of year 0, but rather, as of year 1.)

a. $0

b. $250

c. $133

d. $77

An annuity pays $12 per year for 100 years, with the first payment occurring in one year. What is the present value (P) of this annuity given that the discount rate is 8%?

  1. $146.63
  2. $151.45
  3. $149.93
  4. $144.62

Homework Answers

Answer #1

Q-1)

Calculating the Value of Stream of cashflow at year 1:-

Value of cashflow at Year1 = CF0(1+r)^1 + CF2/(1+r)^1

where, CF0 = Cash flow in Year 0= $500

CF2 = Cash flow in Year 2= -$500

r = Interest rate = 8%

Value of cashflow at Year1 = $500*(1+0.08)^1 + [-$500/(1+0.08)^1]

Value of cashflow at Year1 = $540 - $462.96

Value of cashflow at Year1 = $77

Option D

Q-2)

calculating the Present Value of Annuity:-

Where, C= Periodic Annuity Payments = $12

r = Periodic Interest rate =8%

n= no of periods = 100

Present Value = $149.93

Option 3

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating       

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
a. Calculate the present value (PV?) of a cash inflow of $500 in one year, and...
a. Calculate the present value (PV?) of a cash inflow of $500 in one year, and a cash inflow of $1,000 in 5 years, assuming a discount rate of 15%. b. Calculate the present value (PV?) of an annuity stream of 5 annual cash flows of $1,200, with the first cash flow received in one year, assuming a discount rate of 10%. c.What is the present value of a perpetual stream of annual cash flows of $100, with the first...
The second and fifth cash flows in the following cash flow stream are missing. Both cash...
The second and fifth cash flows in the following cash flow stream are missing. Both cash flows are the same (that is, CF2 = CF5). If the future value at the end of year 10 (that is, at t = 10) of this cash flow stream (these are the only cash flows in the cash flow stream) is $10,000 at a nominal annual interest rate of 8 percent, compounded semiannually, what is the amount of the missing cash flow?
Draw a time line of the following three cash flow streams. Stream A has cash flows...
Draw a time line of the following three cash flow streams. Stream A has cash flows of -100, 90, 186, 85, and 200 in years 0 through 4. Stream B is an annuity with cash flows of $100 for three years. Stream C is a perpetuity with a constant cash flow of $80. Compare the cash flows of the three cash flow streams. Identify the cash flow stream pays the most at year two and record this NUMBER.
Year Amount of cash flow 1-4 $25,000 per year (payments at the end of the year)...
Year Amount of cash flow 1-4 $25,000 per year (payments at the end of the year) 5-9 $20,000 per year (payments at the end of the year) Assume an interest rate of 6% compounded annually. Calculate the present value of the stream of cash flows above. Use .5919 as the PV factor
Assuming a project having the following cash flows: Year 0 1 2 3 4 Cash flow...
Assuming a project having the following cash flows: Year 0 1 2 3 4 Cash flow -6000 500 -500 5000 3000 What is the NPV of this project if the discount rate is 5%? Report the answer with 2 numbers after decimal place What is the IRR of this project? Report the answer in percentage term with 2 numbers after decimal place such as 12.43%. What discount rate will make NPV of this project equals to -494.258 Report the answer...
For the following set of cash flows,    Year Cash Flow 0 –$8,000            1 3,400...
For the following set of cash flows,    Year Cash Flow 0 –$8,000            1 3,400            2 6,100            3 3,800               a. What is the NPV at a discount rate of 0 percent?    b. What is the NPV at a discount rate of 9 percent?    c. What is the NPV at a discount rate of 21 percent? d. What is the NPV at a discount rate of 26 percent?
For the following set of cash flows,    Year Cash Flow 0 –$7,300            1 6,500...
For the following set of cash flows,    Year Cash Flow 0 –$7,300            1 6,500            2 5,200            3 6,700               Required: (a) What is the NPV at a discount rate of 0 percent? (b) What is the NPV at a discount rate of 14 percent? (c) Whatis the NPV at a discount rate of 21 percent? (d) What is the NPV at a discount rate of 26 percent?
For the following set of cash flows,    Year Cash Flow 0 –$6,800            1 3,800...
For the following set of cash flows,    Year Cash Flow 0 –$6,800            1 3,800            2 3,700            3 5,000               a. What is the NPV at a discount rate of 0 percent? b. What is the NPV at a discount rate of 12 percent? c. What is the NPV at a discount rate of 24 percent? d. What is the NPV at a discount rate of 29 percent?
Year 0 = Cash Flow -$16,700 Year 1 = Cash Flow $9,700 Year 2 = Cash...
Year 0 = Cash Flow -$16,700 Year 1 = Cash Flow $9,700 Year 2 = Cash Flow $7,800 Year 3 = Cash Flow $4,400 What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent? What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent? What is the profitability index for the set of cash flows if the relevant discount rate is 22...
Sharon is expecting to following cash flows: -75,000; 45,000; 10,000, and -500, in years 1, 2,...
Sharon is expecting to following cash flows: -75,000; 45,000; 10,000, and -500, in years 1, 2, 3, and 4, respectively. If the appropriate discount rate is 9%, what is the present value of this cash flow stream?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT