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1. You will receive $100 per year for 10 years. The discount rate is 10%. What is the present value of this stream?
1. You will receive $100 per year for 10 years. The discount rate is 10%. What is the present value of this stream?
2. Using the previous information, assume now the 100 will increase at a 5% per year from year 1. What is the new present value?
3. Now assume compute the present value for the same information using a perpetuity without and with growth. Compare the 4 present values. What would you rank those?
4. You look at apartment prices online. You find that a two bedroom apartment is being sold at $1,250,000. The discount rate is 8% annual and the rent growth rent for this kind of apartments if 5% a year. What is the monthly rent associated to this present value?
only question 3. specially the last part.
