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  3. return and present value a. suppose you pay $810 t

Return and Present Value a. Suppose you pay $810 today for an asset that will...

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Return and Present Value a. Suppose you pay $810 today for an asset that will return $1,000 three years from today. What is your simple annual return? What is your effective annual return? b. Suppose a large capital project will take five years to build. After five years, it will generate revenues of $1 million per year for twenty years', after which the capital is sold for scrap value of $5 million. The company's required rate of return is 15% per annum What is the present value to the company of the revenues of the capital project (to two decimal places)? "Note: since revenues are assumed to be received at the end of the period (by default), twenty years means at the end of 19 years. c. Suppose a firm announces an annual profit today of $100. You are thinking of buying shares in the company. You believe the company profits will grow 8% per annum forever. Your required return (yield) is 12% per annum. Find your valuation of the company's profits in present value terms. i. 11. Suppose there are 1,000 shares in the company. How much would you be willing to pay for a share

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