Question

1. Define the three life valuation methods. Make sure to provide an example as part of your answers. (15 points) 2. Consider a project with costs of $10 million per year for 20 » years. Assuming that the costs are paid the first day of each year, what is the present discounted value of these costs, using a 15% discount rate? (6 points) 3. Consider a project with an initial cost of $14 million. There are additional costs of $10 million per year for 20 years. Assume that the additional costs are paid the last day of each year. The project generates cash flows of $15 million in perpetuity. Assume that the cash flows are received the last day of each year. Is the project valuable. Use a 15% discount rate? (10 points)

Answer 1

I can only answer 1 question at a time, so I am answering only question 2.

C 2. 1 2 $71.987in million dollars 3 Present Discounted Value of these costs 5 6 =PV(15%,20,-10, 1) 7

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