1.Calculate the discount rate consistent with a cap rate of 12% and a growth rate of 6%.Show how your answer would change if the cap rate dropped to 10 percent while the growth rate declined to 5 percent.

PV 2.A venture investor wants to estimate the value of a venture.The venture is not expected to produce any free cash flows until the end of year 6 when the cash flow is estimated at $2,000,000 and is expected to grow at a 7 percent annual rate per year into the future.

A.Estimate the terminal value of the venture at the end of year 5 if the discount rate at that time is 20 percent.

B.Determine the present value of the venture at the end of year 0 if the venture investor wants a 40 percent annual rate of return on the investment.