1. Present value of annuity problem. You will receive $2,000 at the end of the next 12 years, assuming a 6% discount rate, what is the present value of the cash flows? 2. Risk & Return and the CAPM. Based on the following information, calculate the required return based on the CAPM: Risk Free Rate = 3.75% Market Return =10% Beta = 1.32 3. (Part 1) Using a 4.4% discount rate, calculate the Net Present Value, Payback, Profitability Index and IRR for each of the investment projects below (note, the inflows are for each year). Based on your calculations rank the projects and support you answer. Project 1 Initial Invest= $505,000, Cash inflows of $105,000 for years 1-5 and $50,000 for years 6-10 Project 2 Initial Invest= $1,100,000, Cash inflows of $420,000 for years 1-3, $0 for years 4-7 and $250,000 for years 8-10. Project 3 Initial Invest= $840,000, Cash inflows of $300,000 for years 1-5, $0 for years 6-9 and $100,000 for year 10. (Part 2) Assuming a budget of $1,200,000 what are your recommendations for the three projects in the above problem. Explain. Assuming a budget of $2,000,000 what are your recommendations for the above problem? Explain. 4. Future value of single sum problem. You put $1,000 in an investment account today which will earn 7% over the next 20 years, what is the future value? 5. Calculate the sustainable growth based on the following information: Earnings after taxes = $23,000. Equity = $110,000. d=48.7%