Question
1. A will invest in an asset that is currently trading at $171,000. This is expected to generate a quarterly cash flow that grows at
1.
A will invest in an asset that is currently trading at $171,000. This is expected to generate a quarterly cash flow that grows at a constant rate of 6% p.a. compounded quarterly. The expected cost of capital is 10% p.a. compounded annually. How much would the first cash flow be from such an asset?
2. Jack is considering renting a new apartment for a total of 4 years. Rent will be paid monthly starting at $2,460 with the first payment in one months' time. The rental contract states that the rent will increase each month at the inflation rate of 2% p.a. compounded annually. If the appropriate discount rate is 6.25% p.a. compounded annually, what is the total cost to Mike of this rental agreement in current terms?
3 .How much money is required now to provide an income of $1,600 per month for six years if the money earns interest at 6% p.a. compounding monthly and the first $1,600 payment is payable 2 years from today?
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