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Find the present value of each of the following cash flows

Here are the examples:

1. How do you find the present value of each of the following cash flows?:

a. $50,000 a year for 20 years, @6%
b. $2.50 a year for ever @ 12%
c. $65 a year for four years and $1065 in the 5th year, @8%
d. $1,250/month for 30 years, @5.75%

2. When the following cash flows are listed as follows how do I find the net present value at 10% and calculate the internal rates of return?:

P0= $-50,000
C2= $15,000

a). Find the net present value (NPV) @ 10%
b). Find the internal rate of return (IRR)

3. Beta values

B=0.5 Company A
B=2.2 Company L
B=1.6 Company S
B=0.8 Company T

Look up the 10 year Treasury bond yield on http://finance.yahoo.com/bonds and use that for the risk free rate (Rrf). Use an average market rate of return Rm=7.7%. Find the expected rate of return (cost of equity) for each of the four companies listed above using the Capital Asset Pricing Model (CAPM)

4. Assuming I have a portfolio that includes the following amounts of stock given the beta value values shown in question 3 above: What is the weighted average beta of the securities in your portfolio?

Company A= 20%
Company L= 40%
Company S= 30%
Company T= 10%

5. If I needed to decide to purchase items at $999,995 each or lease them for 6 years at $18,500.55 per month. Assuming no salvage value, how do I figure out at what interest rate do the lease and the purchase have the same present value?

Solution Summary

The solution explains various finance questions