1) Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co

Question

1)

Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $4,900, $9,900, and $16,100 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 10 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?

2)

If the discount rate is 7 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

B)

What is the present value at 16 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

C)

What is the present value at 30 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $4,900, $9,900, and $16,100 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 10 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?

2)

Wainright Co. has identified an investment project with the following cash flows.      Year Cash Flow 1 $ 850 2 1,190 3 1,450 4 1,600 A)

If the discount rate is 7 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

     Present value $   

B)

What is the present value at 16 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

     Present value $   

  

C)

What is the present value at 30 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Present value $   

  

Explanation / Answer

1.Marko willing to pay today to buy ABC Co 24,732.53 $. This is basically the present value of cash flows of 3 years since the co would be worthless after that.

2.At a disc rate of 7% For the Cash Flow Series
Present Value = $4,238.05

3..At a disc rate of 16% For the Cash Flow Series

Present Value = $3,429.74

4.At a disc rate of 30% For the Cash Flow Series

Present Value = $2,578.18

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