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The annual cash flows from an asset are $2.3m from year 1 to year 6. The cash flows occur at year-end and the interest rate

  1. The annual cash flows from an asset are $2.3m from year 1 to year 6. The cash flows occur at year-end and the interest rate is 10% p.a. compounded annually. What is the accumulated future value of this asset at the end of year six?

What is the present value of this asset?

  1. Kathys rich uncle promises her $1,000 per month, starting today, with a final payment to be made 6 months from today. If the interest rate is 6 percent per annum, what is the present value of the cash flows?

  1. Jason is to start a 6 month live-in training course in 4 months time (i.e. end of month 4). His father, Sam, has promised him $200 per month as support payable at the start of each month. If the interest rate is 12% per annum, payable monthly, how much money will Sam need today to finance Jasons allowance?

  1. If your rich uncle includes you in his will and leaves you with the option of

either

  1. Receiving $60,000 each year for the next 10 years ; Or,

  2. Receiving a lump sum of $400,000 in one year

If the interest rate applicable is 14% which option will you accept?

  1. A five year ordinary annuity with payments of $100 has a present value of $350.

Calculate the discount rate

  1. Assuming an 8 per cent interest rate, calculate the present value of the following

streams of payments:

$1,000 per year forever, with the first payment one year from today

$500 per year forever, with the first payment two years from today

$2,420 per year forever, with the first payment three years from today

  1. You are considering the purchase of a service station which is located on a site that has been leased from the state government, originally for 99 years and currently has 7 years before expiration. The service station generated cash flow of $92,500 last year and the current owner expects an annual growth rate of 6.5%. If the discount rate used to evaluate such businesses is 14.5%, what is a maximum price you would offer for the purchase of the business based on the Present value of the future cash flows?

  1. Nylex Ltd paid dividends per share of $1.80 in 2011. Its earnings and dividends have grown at 5% a year between 2006 and 2011, and are expected to grow at the same rate in the long term. The rate of return required by investors on stocks of equivalent risk is 15%. How much would you pay to purchase the shares in this company today

Can I get detailed answers, on paper(written) for these questions please, would be greatly appreciated! :D

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