Question

Each short answer question is worth 10 points noints. Show work for partial credit. ay of $25,000,000 to purchase You are considering an immediate cash outayo property that generated a cush Intlow of $100.000 You believe that next year's cash Infoww ieve that next years in low would increase with an expected annual inflation rate of 3 in perpetuity. At a required return of 10 um of 109. calculate the NPV of this investment

Answer 1

rate positively ..

To compute the NPV we can use the dividend growth model here.
First we have to compute the present value of the future cash flow
PV of future cash flow =	Expected cash inflow next year/(required rate - growth rate)
			1800000*103%/(10%-3%)
			26,485,714
NPV = PV of cash flow less the present value of outflow
			26485714-25000000
NPV=			1485714
Answer =			1,485,714