Present Value and Multiple Cash Flows.
Investment X offers to pay you $7,000 per year for eight years, whereas Investment Y offers to pay you $9,000 per year for live years. Which of these cash flow streams has the higher present value if the discount rate is 5 percent? If the discount rate is 22 percent?
Calculation of NPV andIRR on a project.
1.You have just paid $20 million in the secondary market for the winning Powerball lottery ticket. The prize is $2 million at the end of the year for the next 25 years. If your required rate of return is 8 percent, what is the net present value (NPV) of the deal?
2.Internal Rate of Return
What is the internal rate of return (IRR) of the Powerball deal in question 1?