Reference no: EM134661

Question 1. You are analyzing the net present value of a project over a 16 year period. Based on the rates in the textbook, what is the actual discount rate you would use given that your analysis must consider the effects of inflation/deflation?

Risk free rate + inflation rate - deflation rate + premium

Question 2. What is the present value of $25,000 that you will receive at the end of two years?

Now, assuming the following variables:
Risk free rate		3.8450%
Inflation rate		2.0000%
Premium		3.0000%
Discount rate		8.8450%
Cash flow		$25,000
Period		2
Present value		$    21,101.97

Question 3. What is the present value of $2,000 a month over the next 3 years?

Cash flow		$2,000
Period		36
Present value		$21,542.03

Question 4. Cash Flow Scenario:  Lease.  Annual payments of $50,000 paid at the beginning of each of the next five years (total of $250,000).  What is the NPV of all lease payments?

Annual payments		$50,000
Payment period		5
Present value		$212,538.64

Question 5. What is the net present value of a lease that requires you to pay $10,000 at the beginning of each year for the next five years and includes a provision for a rebate of $5,000 at eh end of Year 5?

Annual payments		$10,000
Payment period		5
Rebate		$5,000
Present value		$39,234.87	32507.73

Question 6. What is the net present value of an item that has a purchase price of $20,000, requires $1,000 maintenance at the end of each year except year 4, and is expected to have a salvage valueof $1,000 at the end of the 5 year useful life?

Cash flow table
Year	Item		Cash flow	PV Factor	NPV
0	Purchase price		($20,000)	1.0000	($20,000)
1	Maintenance		($1,000)	0.9187	($919)
2	Maintenance		($1,000)	0.8441	($844)
3	Maintenance		($1,000)	0.7755	($775)
4
5	Salvage value		$5,000	0.6546	$3,273
					($19,265)