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1) Your friend, lives in Greece and planning on moving to Germany, has a perpetuity which promises to pay €1,000 at the ending of each year, forever. You received the e-mail from her and she offered to sell you all of payments to be got after the 25th year for a price of €1,000. At the interest rate of 10%, must you pay €1,000 today to get payment numbers 26 and onwards? Briefly describe in detail.

2) Felix Jones, a current engineering graduate, expects starting salary of $ 65,000 per year. His future employer has averaged 5% per year in salary increases for last many years. If inflation is evaluated to be 4% per year for next three years, how much, in year-1 dollars, will Felix be earnings each year? What is inflation rate in Felix's salary?

3) Project K costs= $55,000, its expected cash inflows are= $13,000 per year for eight years, and its WACC is 7%. Determine the project's discounted payback?

Basic Finance, Finance

  • Category:- Basic Finance
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