1) Lite Bike, Inc. has purchased a piece of equipment costing $80,000. It is expected to generate $14,000 each year for 8 years. Determine the rate of return on Lite on the equipment.
2) New Investing has a stream of cash flows for 10 years and believes the rate of return is 9%. What is the present value of the following cash flows:
Year Cash Flow
1 0
2 $2,000
3 $2,000
4 $2,000
5-10 $4,000
3) you have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
Calculate the value of Cash Flow Option 1:
The perpetuity for $800 yearly.
4) You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
Calculate the value of Cash Flow Option 2:
$1500 per year for 11 years
5)You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
Calculate the value of Cash Flow Option 3:
$1100 per year for 16 years with the first payment occuring today.