QUESTION 1.

a. If the cost of capital is 9 percent, what is the present value of $374 paid in year 9? [2 marks]

b. A project produces the following cash flows:

Year Flow

1 432

2 137

3 797

c. If the cost of capital is 15 per cent, what is the projects present value? [4 marks]

d. If you invest $100 at an interest rate of 15 percent, how much will you have at the end of 8 years? [2] marks.

e. An investment of $232 will produce $312.18 in 2 years. What is the annual interest rate? [3 marks]