Find the present value of an ordinary annuity

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Reference no: EM131859741

1. Find the present value of an ordinary annuity of $5,000 per annum for 4 years if the interest rate is 8% per annum.

a. The present value is $20,000.

b. The present value is $33,663.72.

c. None of the other answers are true.

d. The present value is $16,560.63.

2. Your firm is considering a project that will cost $4.55 million upfront, generate cash flows of $5 million per year for three years, and then have a cleanup and shutdown cost of $6 million in the fourth year. Assume a discount rate of 10% per annum, what is the NPV of this project?

a. None of the other answers are true.

b. The NPV of this project is $3.44 million.

c. The NPV of this project is $10.89 million.

d. The NPV of this project is $3.34 million.

3. What is the effective annual interest rate corresponding to a nominal interest rate of 8% per annum, compounding quarterly?

a. None of the other answers are true.

b. The effective annual interest rate is 8%.

c. The effective annual interest rate is 7.5%.

d. The effective annual interest rate is 8.24%.

Reference no: EM131859741

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