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1- Calculating Present Values (Problem 2-1, p. 46)
Calculate the present value of each of the following CASH flow streams, using a discount rate of 10%.
a. $500 received at the end of 5 years.
b. $500 received annually for each of the next 5 years.
c. $500 received annually for each of the next 50 years.
d. $500 received annually for 100 years.
2-2
Singular Construction is evaluating whether to build a new distribution facility. The proposed investment will cost Singular $4 million to construct and provide cash savings of $500,000 per year over the next 10 years.
a. What rate of return does the investment offer?
b. If Singular were to invest another $200,000 in the facility at the end of 5 years, it would extend the life of the project for 4 years, during which time is would continue receiving cash savings of $500,000. What is the international rate of return for this investment?
1- Calculating Present Values (Problem 2-1, p. 46)
Calculate the present value of each of the following CASH flow streams, using a discount rate of 10%.
a. $500 received at the end of 5 years.
b. $500 received annually for each of the next 5 years.
c. $500 received annually for each of the next 50 years.
d. $500 received annually for 100 years.
2-2
Singular Construction is evaluating whether to build a new distribution facility. The proposed investment will cost Singular $4 million to construct and provide cash savings of $500,000 per year over the next 10 years.
a. What rate of return does the investment offer?
b. If Singular were to invest another $200,000 in the facility at the end of 5 years, it would extend the life of the project for 4 years, during which time is would continue receiving cash savings of $500,000. What is the international rate of return for this investment?
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