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FIN 300 Lecture 5: Class 5_TVM(2) Student Version.pdf

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amethystgoat887
8 Feb 2015
School
Ryerson University
Department
Finance
Course
FIN 300
Professor
Laleh Samarbakhsh

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Document Summary

An investment will pay per year for the next 5 years. It will then pay ,000 per year for the following 5 years. You invest ,000 per year for the next 10 years. For the first 4 years you earn 5% per year. For the following 6 years you earn 8% per year. How much would you have at the end of 10 years. Chapter 6 (contd. : growing annuities, growing perpetuities, annuities due, effect of compounding, mortgage. Growing annuities: growing annuity is a finite stream of cash flows growing at a constant rate. An investment promises to make a series of 30 equally spaced payments. The payments will then grow at a constant rate of 3% per year. How much would you be willing to pay for this investment if you require a return of 7%: answers. Trggrcpv1111growing perpetuities: growing perpetuity is an infinite stream of cash flows growing at a constant rate.

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Related Questions

You are considering the purchase of an investment that would pay you $82 per year for Years 1-4, $67 per year for Years 5-7, and $61 per year for Years 8-10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment?

You are considering the purchase of an investment that would pay you $25 per year for Years 1-4, $58 per year for Years 5-7, and $90 per year for Years 8-10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment? Show your answer to the nearest $.01. Do not use the $ sign in your answer.

Assignment Problems –Discounted Cash Flow Valuation

1) A first round draft choice quarterback has been signed to a three year $25 million contract. The details provide for an immediate cash bonus of $2 million. The player is to receive $5 million in salary at the end of the first year ,$8 million the next, and $10 million at the end of the last year. Assuming a 15 per cent discount rate , is this package worth $25 million. If not how much is it worth?

2) You are looking into an investment that will pay you $12000 per year for the next 10 years. If you require a 15 per cent return , what is the most you would pay for this investment

3) Suppose you borrow $10,000. You are going to repay the loan by making equal annual payments for five years. The interest rate on the loan is 14 per cent per year. Prepare an amortization schedule for the loan. How much interest will you pay over the life of the loan.