Given the following set of cash flows: Reversed Cash Flow #4 Cash Flow #4 Period 1 $ $ $ $ $ 2 3 4 $ $ Cash Flow Reversed Cash Flow #1 & 2 #3 $ 40,000 $ 5,000 $ 35,000 $ 10,000 $ 30,000 $ 15,000 $ 25,000 $ 20,000 $ 20,000 $ 25,000 $ 15,000 $ 30,000 $ 10,000 35,000 $ 5,000 $ 40,000 S (150,000) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 (150,000) 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 5 $ $ S 6 7 8 $ S PV FV Rate of Return PV Rate of Return 8% 1. If your required rate of return is 8% per year, what is the present value of the above cash flows? 2. If your required rate of return is 8% per year, what is the future value of the above cash flows? 3. Suppose that you are offered another investment that is identical, except the cash flows are reveresed. Compute the PV and FV, is this investment worth more or less than #1 and #2? 4. If you paid $150,000 for the original investment, what average annual rate of return would you earn? What return would you earn on the reversed cash flows? What is the PV of these cash flows