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Question: question 1 the lincolns are considering an investment that is...

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QUESTION 1

The Lincoln’s are considering an investment that is expected to pay $750 per month for the next 10 years. If their required rate of return is 9.5 percent, how much is this investment worth to them today?   

$7,184

$57,961

$7,895

$1,932

QUESTION 2

Jefferson owns an investment that will pay $6,500 per year forever into the future. If his discount rate is 21 percent, how much is this investment worth to him today?

$30,952

$310

$26,351

$136,500

QUESTION

Washington is considering investing in a project that will generate a cash flow of $35,000 next year. This figure is expected to grow by 4 percent each year forever into the future. If Washington’s require rate of return on investments like this is 14 percent, how much should he be willing to pay for this project?  

$875,000

$565,500

$350,000

$250,000

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