Question

Prepare responses to Mini Cases for Chapter 4 from Text Book

Reference:

Ehrhardt. (2017). Corporate Finance, 6^th edition. Boston: Cengage.

Assume that you are nearing graduation and that you have applied for a job with a local bank.As part of the bank's evaluation process, you have been asked to take an examination whichcovers several financial analysis techniques. The first section of the test addresses discountedcash flow analysis. See how you would do by answering the following questions

A.Draw time lines for

(a) a $100 lump sum cash flow at the end of year 2,

(b) an ordinaryannuity of $100 per year for 3 years, and

(c) an uneven cash flow stream of -$50, $100,$75, and $50 at the end of years 0 through 3

B.

1.What is the future value of an initial $100 after 3 years if it is invested in an account paying 10 percent annual interest?

Answer 1

(b) future value of $100 after 3 years @10%

=100(1.1)^3

=133.1

(A)