a.
Adequate information:
Stream’s A first cash flow received three years from = $11,600
Growth rate for Stream A= 4%
Stream B’s first cash flow received two years from today= -$13,000
Discount rate= 12%
To compute:
Introduction: Present value is also known as a present discounted value, in which the
b.
Adequate information:
Stream’s A first cash flow received three years from =$11,600
Growth rate for Stream A=4%
Stream B’s first cash flow received two years from today=-$13,000
Discount rate=12%
To compute:
Introduction: IRR is the rate at which the
c.
Adequate information:
Stream’s A first cash flow received three years from =$11,600
Growth rate for Stream A=4%
Stream B’s first cash flow received two years from today=-$13,000
Discount rate=12%
To discuss: The correct IRR rule for Project C.
Introduction: IRR is the rate at which the NPV of a project is zero, that is, the present value of aggregate cash inflows is the same as the aggregate cash outflows.
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Chapter 5 Solutions
CORPORATE FINANCE--CONNECT ACCESS CARD
- Calculate the present value at t=0 (now) of the following cash flows: D. $100 every 3 years forever, with the first payment at t=3 (t counts years), where the effective annual rate is .05 (i.e. 5%) E. $1000 every 3 years forever, with the first payment at t = 3 (t counts years), where the effective annual rate is .05 (i.e., 5%). F. $1000 every 3 years forever, with the first payment at t = 3 (t counts years), where the effective annual rate is .10 (i.e., 10%).arrow_forwardWhat is the present value of end-of-year cash flows of $1,000 per year, with the first cash flow received three years from today and the last one 10 years from today? Use a discount rate of 12 percentarrow_forwardWhat is the present value of a perpetual stream of cash flows that pays $ 7,500 at the end of year one and the annual cash flows grow at a rate of 2% per year indefinitely, if the appropriate discount rate is 9%? What if the appropriate discount rate is 7%? Question content area bottom Part 1 a. If the appropriate discount rate is 9%, the present value of the growing perpetuity is $ enter your response here . (Round to the nearest cent.)arrow_forward
- What is the present value of end-of-year cash flows of $1,000 per year, with the first cashflow received three years from today and the last one 10 years from today? Use a discount rate of 12 percent .arrow_forwardWhat is the present value of the following cash flows if the discount rate is at 5%? You receive 100 today, 200 in each of next 3 years (Year 1,2,3) and 150 in each of the next following 2 years (Year 4,5)? Enter your answer in absolute number with 2 decimal places.arrow_forwardThe appropriate discount rate for the following cash flows is 9.32 percent per year. Year Cash Flow 1 $ 2,480 2 3,920 2,170 3 4 What is the present value of the cash flows? (Do not round intermediate calculations · and round your answer to 2 decimal places, e.g., 32.16.) Present valuearrow_forward
- What is the present value of the following stream of cash flows if the discount rate is 9%? Year 1-5: $14,000 inflow Years 6-20: $23,000 inflow (Use the present value tables in your course packet for any present value calculations. Round your final answer to the nearest dollar.)arrow_forwardWhat is the present value of end-of-year cashflows of $1,000 per year, with the first cashflow received three years from to day and the last one 10 years from today? Use a discount rate of 12 percentarrow_forwardWhat is the present value of the following cash flows, if the discount rate is 10% annually? Beginning Cash Flow of Year 1 P2,500 2,750 3,000 4 3,250 5 3,500 2. 3.arrow_forward
- The appropriate discount rate for the following cash flows is 6.98 percent per year. Year Cash Flow 1 $ 2,400 2 0 3 3,840 4 2,090 What is the present value of the cash flows? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present Valuearrow_forwardThe appropriate discount rate for the following cash flows is 7.83 percent per year. Year Cash Flow 1 $ 2,570 2 0 3 4,010 4 2,260 What is the present value of the cash flows? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)arrow_forwardConsider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 8% per year. The initial cash payment at the end of year 1 is $1,000. The payments occur annually for 5 years. Series B is a uniform series with payments of value X occurring annually at the end of years 1 through 5. You must make the payments in either Series A or Series B. Solve, a. Determine the value of X for which these two series are equivalent if your TVOM is i = 6.5%. b. Given the value of X from part a, if your TVOM is 8%, would you be indifferent between these two series of payments? If not, which do you prefer? c. Given the value of X from part a, if your TVOM is 5%, would you be indifferent between these two series of payments? If not, which do you prefer?arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
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