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What is the present value of a perpetual stream of cash flow

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Reference no: EM131090788

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 take 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 the present value of each if these three investments if the appropriate discount rate is 13%?

Reference no: EM131090788

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