You are looking at an investment that will provide the following cash flows in dollars: (Year 1: 15,000); (Year 2: 20,000); (Year 3: 25,000). If the discount rate increases from 7% to 10 %, what will happen to the Present Value of the investment today? The present value will increase. The present value will decrease. The present value will remain unchanged. The present value will increase but only slightly.
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- What would be the interest rate that would allow you to convert an investment from B/.5,000 to B/.20,227.79 in 10 years? (NOTE: Do this problem ONLY with Conversion Factor and the corresponding Excel Financial Function and remember to confirm your answer with the corresponding Cash Flow Table)An investment will provide the following future cash flows. Year 1 6,768 Year 2 = 3,989 Year 3 and 4 = 6,869 Year 5 = 1,797 Using a 9.96% discount rate, what is the present value of this investment?(Present value of complex cash flows) You have an opportunity to make an investment that will pay $100 at the end of the first year, $100 at the end of the second year, $300 at the end of the third year, $400 at the end of the fourth year, and $200 at the end of the fifth year. a. Find the present value if the interest rate is 11 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…
- (Present value of complex cash flows) You have an opportunity to make an investment that will pay $100 at the end of the first year, $300 at the end of the second year, $500 at the end of the third year, $300 at the end of the fourth year, and $200 at the end of the fifth year. a. Find the present value if the interest rate is 7 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 CF, is the initial outlay or cash flow at time 0, and, because there is no cash flow at time 0, CF = 0.) b. What would happen to the present value of…You have an opportunity to make an investment that will pay $100 at the end of year 1, $400 at the end of year 2, $400 at the end of year 3, $400 at the end of year 4 and $300 at the end of year 5. Find the present value of this cash flow stream if the interest rate is 8%. (Hint: You can simply discount each cash flow to the present and then add them up or use the "=NPV function" in Excel or the CF key on your financial calculator a. $1,251.25 b. $1,351.25 c. $1,151.25 d. $1,451.25 a.. b.. C. . d..you are considered an investment with the following cash flows. If the required rate of return for that investment is 13.5% should you accept it based solely on the internal rate of return Year. Cash flows 1. -$12000 2. $5500 3. $8000 4. -$1500 A. yes, because the IRR exceeds the required return B. yes, because the IRR is a positive rate of return C. No, because the IRR is less than the required return D. you cannot apply the IRR rule in this case because there are multiple IRRs.
- The present value represents the amount of money you would have to deposit today in order to match what you would get from the income stream at the future date. The formula is Time = M = i Future value represents the total amount of money you would have if you deposit the income stream until a future date. The formula is To start our problem we need to identify the variables. Rate =r= i Income Stream S(t) = i Present Value = years % M 1. 0 S (t) et dt. Future Value = Present Value* erM dollars/yearConsider the following cash flow. Calculate the rate of return for an investment of 1000 TL.McCann Company has identified an investment project with the following cash flows. a. If the discount rate is 11 percent, what is the present value of these cash flows? b. What is the present value at 18 percent? c. What is the present value at 29 percent?
- Consider the cash flow shown in the graph and assume that the interest rate is 10%. What is the value of X at to ensure that cash flow shown has a future value of $1,500,000? Answer to the closest dollar.What can you say about the investment's projected rate of return if the present value of the predicted net cash flows from a machine, discounted at 10%, exceeds the amount to be invested? What can you say about the projected rate of return if the present value of the net cash flows is less than the investment amount when discounted at 10%?You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment? The discount rate decreases. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for $20,000 rather than for $10,000. The discount rate increases. The riskiness of the investment's cash flows decreases. The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years.
