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## assignment

1. Find the following values for a single cash flow: [4 points]
a. The future value of \$525 invested at 8% for one year
b. The future value of \$525 invested at 8% for five years
c. The present value of \$525 to be received in one year when the opportunity cost rate is 8%
d. The present value of \$525 to be received in five years when the opportunity cost rate is 8%

2. Consider the following net cash flows:
Year Cash Flow
0                      \$    0
1                         375
2                         440
3                         590
4                         706
5                         706

a. What is the net present value if the opportunity cost of capital (discount rate) is 9%? [5
points]

b. Add an outflow (or cost) of \$811 at Year 0. Now, what is the net present value? [5 points]

3. Consider another set of net cash flows:
Year  Cash Flow
0                        \$ 3,500
1                            3,875
2                            4,333
3                            4,811
4                                    0
5                            5,854

a. What is the net present value of the stream if the opportunity cost of capital is 8%? [5
points]

b. What is the value of the stream at the end of Year 5 if the cash flows are invested in an
account that pays 8% annually? [5 points]

• For all problems, you are required to illustrate how you got to your final answers.  If you do not show your work, you will not receive credit.
• For problems 2 and 3, you are required to show the analysis on a timeline as was done within the chapter.  An example of such a timeline is on page 272 of the text.  (Although the textbook also demonstrates the financial calculator solution and the spreadsheet solution, these are not considered acceptable for this homework assignment.)
• Your final answers to the problems must be highlighted in yellow.