Question
(1) Investment A is expected to pay $150 per year for 40 years, starting one year from today (at t =1). What is the present
(1) Investment A is expected to pay $150 per year for 40 years, starting one year from today (at t=1). What is the present value of all future cash flows from this investment if the relevant annual discount rate is 10 percent?
(2) Investment B is expected to pay $200 per year forever, starting one year from today (at t=1). What is the present value of all future cash flows from this investment if the relevant annual discount rate is 12 percent?
(3) Investment X is expected to pay $100 five years from today (at t=5), and payments are expected to grow at a rate of 8 percent per year thereafter (forever). What is the present value of all future cash flows from this investment if the relevant annual discount rate is 10 percent?
(4) Investment Y is expected to pay $500 exactly 15 years from today (at t=15). Cash flows are expected to remain constant throughout, and the final payment will be made 45 years from today (at t=45). What is the present value of all future cash flows from this investment if the relevant annual discount rate is 8 percent?
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