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1. You are considering buying a vacation house as an investment property and want to estimate its value. For simplicity, assume all cash flows occur at the end of each year, with the first cash flow occurring one year from today. - Rent revenue is expected to be $35 thousand dollars in the first year, growing at 10% in each subsequent year. Maintenance and upkeep will be constant at $18 thousand per year. - You plan to hold the property for 5 years at the end of which time you will sell the property for \$275 thousand. - You require an annual return of 15% on the investment. What is the present value of this vacation house? 2. You are considering buying a vacation house as an investment property and want to estimate its value. For simplicity, assume all cash flows occur at the end of each year, with the first cash flow occurring one year from today. - Rent revenue is expected to be $14 thousand per year in the first year, growing at 8% per year for 5 years. Maintenance and upkeep will also be growing at 8% per year for 5 years, with $6 thousand of expenses in the first year. After 5 years, both rent revenue and maintenance expense will grow at a constant 3% per year in perpetuity. - You require an annual return of 15% on the investment. What is the present value of this vacation house? 3. A famous quarterback just signed a $15 million contract providing $3 million a year for five years, with the first payment one year from today. A less famous receiver signed a \$14 million five-year contract providing \$4 million now, and \$2 million a year for five years starting one year from today. Who is better paid? Assume a discount rate of 12%. 4. An oil well now produces 50,000 barrels per year. The well will produce for 5 years more, but production will decline by 4 percent per year. Oil prices, however, will increase by 2% per year. The discount rate is 20%. What is the PV of the well's production if today's price is $80 per barrel