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An investment advisor offers you a product that
will deliver cash-flows at the end of each of the
next seven years. The first cashflow is $5,000
and every year thereafter, the cashflow will grow
at a rate of 4%. If the annual interest rate is
2%, what is the present value of this
opportunity?
Step by step
Solved in 3 steps with 2 images
- Consider an investment that offers $4,000, $5,000 and $6,000 in the next 3 years, with the first payment occurring one year from now. The required return is 7%. What is the present value of this investment?Suppose you invest $2,000 today and receive $11,000 in five years. a. What is the internal rate of return (IRR) of this opportunity? b. Suppose another investment opportunity also requires $2,000 upfront, but pays an equal amount at the end of each year for the next five years. If this investment has the same IRR as the first one, what is the amount you will receive each year?An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If the rate of interest earned on the investment is 8%, what is the present value of this investment? What is its future value? How do you solve this with excel?
- You have $1725 to invest. You know that a particular investment will double your money in five years. How much will you have in 10 years if you invest in this investment, assuming that the annual rate of return is guaranteed for the time period? Cevap:Today (t=0), you invested the starting prinipal of 1536 dollars. At the end of the first, second and third years, you will receive payments in the amount of 40%, 45% and 50% respectively of your initital investment. What is the net present value (NPV) of the investment if the minimum attractive rate of return (MARR) is 7.8%. Calculate the MARR for an NPV between $0 and $1 and draw the cash flow diagram.Consider an investment which pays $2,000 at the end of year 1, year 2, and year 3. In year 4, the investment will pay $5,000 and this payment will grow by 4.3% each year forever. If the appropriate interest rate is 7%, what is this investment worth today?
- An investment offers $8800 per year for 14 years with the first payment occuring one year from now. Assume the required returnis 12 percent. a. What is the value of investment today? b. What would the value be if the payment occured for 39 years? c. What would the value be if teh payments occured for 74 years? d. What would the value be if the payments occured forever?You are trying to value the following investment opportunity: The investment will cost you $5663 today. In exchange for your investment you will receive cash payments in perpetuity. The first payment will occur after one year and will be $431. Afterwards, cash payments will grow by 1.3% annually. The applicable interest rate for this investment opportunity is 7.6% (effective annual rate. Calculate the NPV of this investment opportunity.Suppose you have the opportunity to make an investment in a real estate venture that expects to pay investors 750 dolar at the end of each month for the next eight years . You believe that a reasonable return on your investment should be an annual rate of 15 percent compounded monthly.a. How much should you pay for the investment?b. What will be the total sum of cash you will receive over the next eight years?c. What do we call the difference between (a) and (b)?
- An investment opportunity requires a payment of $620 for 12 years, starting a year from today. If required rate of return is 6.00 percent, what is the value of the investment to you today?You have an opportunity to make an investment that will pay $ 300 at the end of the first year, $ 100 at the end of the second year, $ 200 at the end of the third year, $ 400 at the end of the fourth year, and $500 at the end of the fifth year. a. Find the present value if the interest rate is 9 percent. (Hint: You can simply bring each cash flow back to the present and then add them up. Another way to work this problem is to either use the =NPV function in Excel or to use your CF key on a financial calculator —but you'll want to check your calculator's manual before you use this key. Keep in mind that with the =NPV function in Excel, there is no initial outlay. That is, all this function does is bring all the future cash flows back to the present. With a financial calculator, you should keep in mind that CF0 is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF0 =0.) b. What would happen to the…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 $600 at the end of Year 6. A. If other investments of equal risk earn 4% annually, what is its present value? Round your answer to the nearest cent. B. If other investments of equal risk earn 4% annually, what is its future value? Round your answer to the nearest cent.