Problem:
An investment is expected to pay the following annual cash flows:
0
1: $600
2: $600
3: $800
4: $1200
5: $1500
If the investor thinks the apppropriate interest rate of this investment is 9.3%, what is the net present value of the above cash flow stream?
Suppose your are informed that the price of this investment is actually worth $3,000, what is the expected rate of return on this investment: