Question

Mr Halo is considering three investment opportunities A,B and C

Investment A is expected to pay N$800 per year for three years, followed by N$1000 per year for four years, followed by N$2000 at the end of the eighth year.

Investment B is expected to pay N$3000 at the end of the fourth year followed by N$400 indefinitely.

Investment C will pay N$1000 at the end of year 2, N$500 at the end of year 3, followed by N$400 at the end of year 4 which will grow by 2% indefinitely. Mr Halo has a required return of 10%

a) for investment A, calculate the present value of future cash flows at the end of year 3

b) Calculate the present value of investment A as at year 0

c)Calculate the present value of investment B as at year 0.

d)Calculate the present value of investment C at year 0.