1) Lite Bike, Inc. has purchased a piece of equipment costing $80,000. It is expected to generate $14,000 each year for 8 years. Determine the rate of return on Lite on the equipment.

2) New Investing has a stream of cash flows for 10 years and believes the rate of return is 9%. What is the present value of the following cash flows:

Year   Cash Flow

1        0

2        $2,000

3        $2,000

4        $2,000

5-10   $4,000

3) you have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.

Calculate the value of Cash Flow Option 1:

The perpetuity for $800 yearly.

4) You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.

Calculate the value of Cash Flow Option 2:

$1500 per year for 11 years

5)You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.

Calculate the value of Cash Flow Option 3:

$1100 per year for 16 years with the first payment occuring today.