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Author Question: You estimate that the little drive-through coffee kiosk you own will generate ordinary annuity ... (Read 71 times)

tatyanajohnson

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on: Jul 10, 2018
You estimate that the little drive-through coffee kiosk you own will generate ordinary annuity after-tax cash flows of 150,000 per year for the next ten years.
 
  If you discount these cash flows at an annual rate of 14, what is the present value of your expected cash flows?
  A) 782,417.35
  B) 891,955.78
  C) 1,500,000.00
  D) 2,900,594.27

Question 2

________ risk ________ be eliminated through greater diversification and is due to firm-specific or industry-wide factors such as strikes or resource price changes.
 
  A) Systematic; can
  B) Systematic; cannot
  C) Unsystematic; can
  D) Unsystematic; cannot
  E) None of the above


peilian

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: A
Explanation: A)
PV = PMT  = 150,000  = 782,417.35.
MODE = END
INPUT 10 14 ? -150,000 0
KEY N I/Y PV PMT FV
CPT 782,417.35

Answer to Question 2

C


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