Question 2 (a) When you attended a conference recently, an investment banker made the following remarks: ‘The future value of a perpetuity can be easily computed using one of the time value functions in Excel spreadsheet. And the present value of a growing annuity can be computed as long as an investor knows the number of years and amount of cash flow in the first year.’ Criticize the statements made by the investment banker. Your answer should not exceed 100 words. (12 marks)

when to use present value table and when to use annuity table ?

5. Develop fundamental concepts of Annuity6. Calculate Future and Present value of Annuity7. Calculate Present Value of Perpetuities8. Valuing mixed cash flow stream

Question 1a) Find the present value of $500 due in 3 years at 8.75% p.a. compounded quarterly.b) Find the future value of $2,000 invested for 5 years at 5.85 % p.a. compounded daily.c) Find the future value of $2,000 invested for 3 years at 5.85% p.a., compounded dailythen at 5.5% p.a., compounded continuously for the next 2 years. No furthercompounding after year 5.Note: round your answers to 2 decimal places.

Which of the following statements regarding growing perpetuities is FALSE?a.PV of a growing perpetuity = C/(r-g)b.A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever.c.To find the value of a growing perpetuity one cash flow at a time would take forever.d.None of them.e.We assume that r < g for a growing perpetuity.

Tressor Company is considering a 5-year project. The company plans to invest $90,000 now, and it forecasts cash flows for each year of $27,000. The company requires that investments yield a discount rate of at least 14%. Selected factors for a present value of an annuity of $1 for five years are shown below: Interest rate Present value of an annuity of $1 factor for year 510% 3.790812% 3.604814% 3.4331Calculate the internal rate of return to determine whether it should accept this project.