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4. How much would you pay today for the right to receive nothing for the next 10 years and $200 a year for the

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4. How much would you pay today for the right to receive nothing for the next 10 years and $200 a year for the following 10 years if you can earn 14% interest on alternative investments of similar risk? [1] 5. Calculate the NPV and IRR for the following investment: Purchase property for $100,000 in year 0, cash flows from rental income in years 1 and 2 equal $2000 for each year, cash flows from rental income in years 3 and 4 equal $3000 for each year. You plan to sell the property for $150,000 at the end of year 4. [2]

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4 To calculate the present value of the cash flows we can use the formula for the present value of an annuity PV C 1 1 rn r Where PV is the present va... blur-text-image

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