Question
1a) What is the present value PV of the following streams of cash flows (CFs), if the discount rate is 7% of a stream of
1a) What is the present value PV of the following streams of cash flows (CFs), if the discount rate is 7% of a stream of 10 CFs. The first CF starts next year and is equal to $2,000. Then the next 5 CFs grow at 15% (over the prior year). The next 2 CFs are $0; the last 2 CFs are equal to $21,000.
1b) You will need $2,000,000 when you retire in 30 years from today. You are planning to make deposits in Citigroup Inc. (C) at the end of each year (first deposit in 1 year from today).
How much do you need to deposit every year ?
Note: The answer depends on the discount rate that reflects the risk of your cash flows. Assume that the discount rate is 6%.
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