Question

Jacklyn Linetsky recently purchased a 10-year investment which
pays $100 at t = 1, $200 at t = 2, $500 at t = 3, and some fixed
cash flow, X, at the end of each of the remaining 7 years. The
investment cost her $7250. Alternative investments of equal risk
have a required return of 8.5 percent. What is the annual cash flow
received by Jacklyn at the end of each of the final 7 years, that
is, what is X?

Hit: To solve this question, use “Goal Seek” in Tools Menu. Go
to Data and then Click on What-If Analysis and then Click on Goal
Seek and enter the required entry.

Answer #1

First set up a quick model as shown below:

I will show you the snapshot in formula mode so that you know how to set this up:

Now do a goal seek:

Output of goal seek:

Hence, the answer is X = 1,646 (or 1,646.11 to be precise)

You have been offered a 7-year investment at a price of $50,000.
It will pay $5,000 at the end of Year 1, $10,000 at the end of Year
2, and $15,000 at the end of Year 3, plus a fixed but currently
unspecified cash flow, X, at the end of Years 4 through 7. The
payer is essentially riskless, so you are sure the payments will be
made, and you regard 9% as an appropriate rate of return on
riskless...

Consider an investment that pays $41.98 in year 1, and then
stabilizes and pays $6.1 every year forever after that (the first
cash flow is in year 2) This firm does not intend to grow and has
an interest rate (required rate of return) of 7%. What is the
present value of this investment opportunity? Give your answer to
two decimals

TVM:
1. You are interested in saving money for your first house. Your
plan is to make regular deposits into a brokerage account that will
earn 14 percent. Your first deposit of $5,000 will be made today.
You also plan to make four additional deposits at the beginning of
each of the next four years. Your plan is to increase your deposits
by 10 percent a year. (That is, you plan to deposit $5,500 at t =
1, and $6,050...

Consider an investment that pays $18.8 in year 1, and then
stabilizes and pays $6.18 every year forever after
that (the first cash flow is in year 2) This firm does not intend
to grow and has an interest rate (required rate of return) of
9%. What is the present value of this investment
opportunity? Give your answer to two decimals

5-7 Present and Future Values of a Cash Flow
Stream An investment will pay $100 at the end of each of
the next 3 years, $200 at the end of year 4, $300 at the end of
year 5, and $500 at the end of Year 6. If other investments of
equal risk earn 8% annually, what is its present value? Its future
value?

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

Problem 1:
a) An annuity pays into an account 100 at end of year 2, 200 at
end of year 3, ..., up to 900 at end of year 10. Interest rate is
7% per year. At end of year 12, how much is in the account
b) An annuity pays 800 at end of year 1, 900 at end of year
2,..., 2000 at end of year 13. What is the present value of the
annuity? Use i =...

1. Frances is considering a 10 year bond with a face value of
$100 which pays an annual coupon payment of $1. What price should
she pay for it if comparable investments return 3%?
2. If she can buy the bond for $92 what would be the yield to
maturity?
3. In the example above, further investigation reveals that the
constant dividend pattern will not actually emerge until four
years’ time. The dividend expected in the next year is only...

Consider a one-year 6% semi-annual coupon bond with a face value
of $1,000 that costs $950?
a) What are the bond’s cash flows?
b) Find the yield to maturity of this bond algebraically being
sure to show your work.
Hint: You will have to use the quadratic formula to solve for
the YTM.
Recall: If there is an equation in the following form: ax2 + bx
+ c = 0
Then the quadratic equation gives X
c) Use Goal Seek...

An investment costs $3,298 today and provides cash flows at the
end of each year for 21 years. The investments expected return is
11.4%. The projected cash flows for Years 1, 2, and 3 are $188,
$272, and $396, respectively. What is the annual cash flow received
for each of Years 4 through 21 (i.e., 18 years)? Assume the same
payment for each of these years. (Round answer to 2 decimal places.
Do not round intermediate calculations).

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 3 minutes ago

asked 4 minutes ago

asked 19 minutes ago

asked 26 minutes ago

asked 35 minutes ago

asked 35 minutes ago

asked 38 minutes ago

asked 48 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago