1. The Basic Principle of Valuations

Consider the row of cash flows in the table above. The present value of the cash flows presented in this table using a discount rate of 4% is ……..

Consider the situation that a company has a loan provided by a bank and has to pay 20 annual fixed payments at the end of each year. These fixed payments (annuities) include both interest and repayment of the loan. The interest rate is 4% per year. The principal amount of this loan is € 4,000,000. Determine the annual annuity the company has to pay.

See the situation described at question 2. What is the total amount that is paid as interest during the total term of the loan?

Someone deposits € 20,000 in a savings account on January 1, 2018. A fixed interest is paid on the account of 0.2% per year. Interest is added to the account every year on December 31. What is the balance on the account on January 1, 2023 when until that date there are no other 
movements in the account?

Someone expects to receive an amount of € 50,000 after eight years. What is the present value of this amount when the required rate of return is 8% per year?

What is the present value of a row of 20 cash flows of € 4,000 per year when the required rate of return is 10% per year and when the first cash flow is received after one year?

Consider an infinite row of cash flows of € 100,000 per year (starting one year from now) and a required rate of return of 10% per year. For what percentage do the first 25 cash flows contribute to the total present value of this row?

Determine the present value of an infinite row of cash flows of which the first cash flow amounts to 
€ 10,000 and is received one year from now, taking into account the fact that the cash flows have a fixed growth rate of 5% per year. The required rate of return is 12% per year.