Question
Exercise Three: Amazon expects to receive $2,500,000 at the end of each year, for the next 20 years. The nominal interest rate is 4.25%. As
Exercise Three: Amazon expects to receive $2,500,000 at the end of each year, for the next 20 years. The nominal interest rate is 4.25%. As shown in class, (a) use a Discounted Cash Flow (DCF) model to compute the present value of these future cash flows, (b) use the NPV function to verify your answer from part (a), (c) if the interest rate changes to 4.75%, how does that affect your present value i.e., use a DCF model, and verify your answer by using the NPV function (all other parameters being the same as in part (a))? (Hint: Please notice that in part (c) you are required to repeat part (a) just using a different interest rate).
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