Your consulting firm will produce cash flows of $125,000 this year, and you expect cash flow thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 6.5%, and you anticipate inflation of about 2.5%. a. What is the present value of your firm's cash flows for years 1 through 6? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value b. How would your answer to (a) change if you anticipated no growth in cash flov? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Your consulting firm will produce cash flows of $125,000 this year, and you expect cash flow thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 6.5%, and you anticipate inflation of about 2.5%. a. What is the present value of your firm's cash flows for years 1 through 6? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value b. How would your answer to (a) change if you anticipated no growth in cash flov? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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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![Your consulting firm will produce cash flows of $125,000 this year, and you expect cash flow thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 6.5%, and you anticipate inflation of about 2.5%.
a. What is the present value of your firm’s cash flows for years 1 through 6? *(Do not round intermediate calculations. Round your answer to 2 decimal places.)*
[Present value input box]
b. How would your answer to (a) change if you anticipated no growth in cash flow? *(Do not round intermediate calculations. Round your answer to 2 decimal places.)*
[Present value input box]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4ca3cc3b-031c-4795-b6dc-d814df068bed%2F3e301f8c-a702-4bf5-8f57-2a0ee162a0b0%2F26skoah_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Your consulting firm will produce cash flows of $125,000 this year, and you expect cash flow thereafter to keep pace with any increase in the general level of prices. The interest rate currently is 6.5%, and you anticipate inflation of about 2.5%.
a. What is the present value of your firm’s cash flows for years 1 through 6? *(Do not round intermediate calculations. Round your answer to 2 decimal places.)*
[Present value input box]
b. How would your answer to (a) change if you anticipated no growth in cash flow? *(Do not round intermediate calculations. Round your answer to 2 decimal places.)*
[Present value input box]
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