1. If your required rate of return is 8% per year, what is the present value of the above cash flows?

2. If your required rate of return is 8% per year, what is the future value of the above cash flows?

3. Suppost that you are offered another investment that is identical, except the cash flows are reveresed. Compute the PV and FV, is this investment worth more or less than #1 and #2?

4. If you paid $150,000 for the original investment, what average annual rate of return would you earn? What return would you earn on the reversed cash flows?

Given the following set of cash flows:

Period Cash Flow

1 $40,000

2 $35,000

3 $30,000

4 $25,000

5 $20,000

6 $15,000

7 $10,000

8 $5,000