An investor invests $2,600 in a company at a steady annual interest yield of 4.99 percent. She earns $390 profit in year 1, earns $467 profit in year 2, and earns $285 profit in year 3. Find the Present Value of this investment asset flow.

Suppose that a bond paying an annual interest payment of $100 falls in price from $1,000 to $900. The yield for the bond Multiple Choice decreased from 11.11 percent to 10.00 percent. O increased by 10 percent. decreased by 10 percent. increased from 10.00 percent to 11.11 percent.

Buena Vision Clinic is considering an investment that requires an outlay of $600,000 and promises a net cash inflow one year from now of $810,000. Assume the cost of capital is 10 percent. Required: 1. Break the $810,000 future cash inflow into three components: a. The return of the original investment b. The cost of capital c. The profit earned on the investment 2. Now, compute the present value of the profit earned on the investment. 3. Compute the NPV of the investment. Compare this with the present value of the profit computed in Requirement 2. What does this tell you about the meaning of NPV?

1. Suppose you buy a share of stock for $10 and sell it for $20; your profit is thus $10. If that happens within a year, your rate of return is an impressive 100%. If it takes five years, what would be the annual rate of return on your investment?