What is the present value of a perpetual stream of cash flow

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Finance Questions

Sarah Wiggum would like to make a single investment and have $1.6 million at the time of her retirement in 35 years. She has found a retirement fund that will earn 4% annually. How much will Sarah have to invest today? If she earned an annual return of 18%, how soon could she then retire?

How many years will it take for $500 to grow to $1,051.82 at 10% compounded annually?

What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity?

To pay for your education you have taken out $28,000 in student loans. If you make monthly payments over 13 years at 6% compounded monthly, how much are your monthly student loan payments?

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:

End of year              A                  B                C
       1                  $ 1,000         $ 1,000       $ 5,000
       2                  2,000            1,000          5,000
       3                  3,000            1,000          (5,000)
       4                  (4,000)          1,000          (5,000)
       5                  4,000            3,000          15,000

What is the present value of each if these three investments if the appropriate discount rate is 13%?

Reference no: EM131436117

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