What is the present value of perpetual stream of cash flows

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Reference no: EM131090649

Question 1 - Sarah Wiggum would like to make a single investment and have $1.6 million at the time of her retirement in 35 years. She has found a retirement fund that will earn 4% annually. How much will Sarah have to invest today? If she earned an annual return of 18%, how soon could she then retire?

Question 2 - How many years will it for $500 to grow to $1,051.82 at 10% compounded annually?

Question 3 - What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity?

Question 4- To pay for your education you have taken out $28,000 in student loans. If you make monthly payments over 13 years at 6% compounded monthly, how much are your monthly student loan payments?

Question 5 - You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:

Investment

End of Year

A

B

C

1

$1,000

$1,000

$5,000

2

2,000

1,000

5,000

3

3,000

1,000

(5,000)

4

(4,000)

1,000

(5,000)

5

4,000

3,000

15,000

What is thaw present value of each if these three investments if the appropriate discounts rate is 13%?

Reference no: EM131090649

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