Suppose you plan to start your own business in few years. Based on project sales and costs, you expected that the cash flows over the SIX years life of the business will be as follows:

Year $1$ $$1,200$Year $2$ $$2,500$Year $3$ $$3,200$Year $4$ $$4,500$Year $5$ $$5,500$Year $6$ $$6,000$

It will cost about $$40,000$ to begin the new business. You use a $6\%$ discount rate to evaluate new business operation.

$[1]$ What is Present Value $[2]$ What is NPV$[3]$ Explain $$ will you suggest to take this project

Please show your supportive calculations and brief explanation

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$---------------------------------------------------------------------------------------------------------------------$Question $2$ and $3$ refer the Week $8$ : HW for Chapter $8$

Question $2$ See PPT Slide $6$ for this calculation

Suppose you invested stock $ $1,000,$ Dividend $100(1,000$ x $10\%).$ You intend to hold the stock for three years. You project you will be able to sell it at the end of year $4$ for $$1,200$ and required rate of return $9\mathrm{.}00\%$

What is Present Value?

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Question $2$ : See PPT slide $14$ for this calculation

What is the price in year $3$

Formula : P$3=$ D$3/(1+$ g$)/($R $$ g$)$

Suppose a company starts to pay dividends for the next three year. After the third year, the dividend will grow at a constant rate of $5\%$ per year. The required return is $7\%.$

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Year Expected Dividend

$13\mathrm{.}5$

$24\mathrm{.}5$

$35\mathrm{.}5$

$1]$ What is Value of the dividends that will be paid between now and then. So the price in three year is$.$

P$3=$ D$3/(1+$ g$)/($R $$ g$)$

$2]$ What is the total value of stock as the present value of the first three dividends plus the PV of the price at Time $3,$ P$3$

Po $=$ D$1/(1+$ R$)1+$ D$2/(1+$ R$)2+$ D$3/(1+$ R$)3+$ P$3/(1+$ R$)3$