Question 3 A factory costs $800,000. You think it will produce a net cash inflow of $170,000 a year for 10 years. If th

[answerhappygod]

Question 3
A factory costs $800,000. You think it will produce a
net cash inflow of $170,000 a year for 10 years. If the
discount rate is 14%, is it a good idea to buy the factory for the
$800,000 asking price?
No, because the present value of the expected future cashflows
is $886,740, which is more than the asking price.
No, because the $800,000 asking price is the present value of
the expected future cashflows.
Yes, because the $800,000 asking price is the present value of
the expected future cashflows.
Yes, because the present value of the expected future cashflows
is $886,740, which is more than the asking price.
Question 4
You are thinking of investing in a zero coupon bond that
has 13 years to maturity. If the annual yield on this bond is
4.7%, what should be the present value of this bond? Assume
semi-annual compounding.
$550.42
$735.49
$1,000
$546.66