Question 173Suppose that a property can generate cash flows of $5,880 per year for 8 years and cansell for $70,690 at the end of the investment period. Assuming a discount rate of 7%compounded annually, what is the present value of this property (Assume end of periodcash flows in your calculation)?

Step 1: Calculate the present value of the annual cash flows.The cash flows are $5,880 per year for…

Answered: Question 17 3 Suppose that a property…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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QUESTION 10 Beatrice owns two investments, A and B, that have a combined total value of $28,100.00. Investment A is expected to pay $25,180.00 in 4 years from today and has an expected return of 12.77 percent per year. Investment B is expected to pay $21,594.06 in 5 years from today and has an expected return of R per year. What is R, the expected annual return for investment B? O 11.50% (plus or minus 10bps) O 14.58% (plus or minus 10bps) O 10.73% (plus or minus 10bps) O 9.50% (plus or minus 10bps) O none of the answers are within 10bps of the correct answer
1.4 The table represents the cash flows received from the investments at the end year. Each investment requires an initial investment of $1000. Answer the questions related to the two investment opportunities in the table below. Year 1 2 3 4 5 Investment A 225 215 250 225 205 Investment B 220 225 250 250 210 There are two approaches to evaluate this investment. Show the necessary calculations. • Assume the interest rate ot 4.33%. Use present value analysis to determine which investment you should choose? Calculating the rate of returns of the investment, which investment would you choose and why?
Question 6 Consider a series of cash flows as follows: £750 received one year from now, £1,200 received three years from now, and £1,250 received six years from now. If the discount rate is 6%, to the nearest £0.01 what is the (i) present value of the cash flows and (ii) the future value in ten years of the cash flows? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a (i) £2,596.29 and (ii) £4,386.38 b (i) £2,395.41 and (ii) £4,289.41 (i) £2,596.29 and (ii) £4,649.56 None of the above (1) £2,395.41 and (ii) £4,046.99
Question content area top Part 1 (Present value of a growing perpetuity) Your firm has taken on cost saving measures that will provide a benefit of $10,000 in the first year. These cost savings will decrease each year at a rate of 4 percent forever. If the appropriate interest rate is 6 percent, what is the present value of these savings? Question content area bottom Part 1 The present value of these cost savings is $enter your response here. (Round to the nearest cent.)
Chapter 10 Discussion Q1 A property is sold for $200,000. Typical financing terms are an 85 percent loan with a 10 percent interest rate over 15 years. If the gross income per year is $30,000, what is the overall capitalization rate?
Question 6.29 The following three sets of cash flows have the same present value: 10,000 payable in 1 year 1,200 at the end of each year for 12 years, with the first payment to be made in one year . X per year, with the first payment to be made in 20 years and the final payment to be made in 30 years The force of interest is constant. Calculate X. A 281 B 4,971 C 5,299 D 5,341 E 5,693
QUESTION 42 Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30 years @ 6% annual interest rate: Following are appropriate factors from tables: Table % / n Present Value of annuity due $1 Present Value of ordinary annuity of $1 Present value of $1 Future Value of ordinary annuity of $1 6%/30 12.15812 13.76483 .17411 79.05819 $????????? invested annually at the end of the year. Required Computations: $12,648.91 $72,648.92 $33,3333.33 $11,927.43
QUESTION 3 Discuss the meaning of "the present value of a future amount"? Give the general equation for present value? a. Farizal intends to buy a new car, the Myvi for RM57,650, but only has RM20,000 in cash. How many years will it take for RM20,000 to grow to RM57,650 if it is invested at 10% interest compounded annually? b. Wahida has decided to invest RM1,000 for two years in a savings account paying 6% interest compounded semi-annually. Compute the future value of Wahida's investment? C. d. Sharifah Aminah receives a mixed stream of cash flows from an investment over the next five years: Year Cash Flow (RM) 5,000 6,500 4,500 5,200 5,800 1 What is the initial amount that Sharifah Aminah should invest if the required return is 10%? 2345
question 10 What is the present value of investment A, B, and C at an annual discount rate of 22 percent round to nearest cent?
QUESTION 16 You are evaluating an investment that promises a series of varying annual payouts over the next five years. Specifically, the investment will yield $200 at the end of the first year, $200 at the end of the second year, $300 at the end of the third year, $400 at the end of the fourth year, and then a final payout of $600 at the end of the fifth year. Given the current market conditions, you can expect an annual return of 11.0% on investments carrying a similar risk profile. What is the present value of this investment opportunity, i.e., the total present value of the series of payments you will receive? A. $1,318.06 B. $1,297.16 OC. $1,276.75 D. $1,256.81 E. $1,237.31 F. $1,218.26 OG. $1,199.63 OH. $1,181.43
QUESTION 41 Compute the missing variable for each of the following alternatives of investments to accumulate $1,000,000. for 30 years @ 6% annual interest rate: Following are appropriate factors from tables: Table % / n Present Value of annuity due $1 Present Value of ordinary annuity of $1 Present value of $1 Future Value of ordinary annuity of $1 6%/30 12.15812 13.76483 .17411 79.05819 One single deposit of $???????? for 30 years. Required Computations: $166,666.66 $174,110 $175,933.83 $126,489

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