What is southern tours willing to pay today to acquire

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Question 1: Your great aunt left you an inheritance in the form of a trust. The trust agreement states that you are to receive RM3,600 on the first day of each year, starting immediately and continuing for 20 years. What is the value of this inheritance today if the applicable discount rate is 6.75 percent?

Question 2: Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of RM187,000, RM220,000, and RM245,000 over the next three years, respectively. After that time, they feel the business will be worthless. Southern Tours has determined that a 13.5 percent rate of return is applicable to this potential acquisition. What is Southern Tours willing to pay today to acquire Holiday Vacations?

Question 3: Lucas will receive RM6,800, RM8,700, and RM12,500 each year starting at the end of year one. What is the future value of these cash flows at the end of year five if the interest rate is 7 percent?

Reference no: EM132609108

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