a. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? b. What is the value of the cash flow stream at the end of Year 5 if the cash flows are invested in an account that pays 10 percent annually? c. What cash flow today (Year 0), in lieu of the $2,000 cash flow, would be needed to accumulate $20,000 at the end of Year 5? (Assume that the cash flows for Years 1 through 5 remain the same.) d. Time value analysis involves either discounting or compounding cash flows. Many healthcare financial management decisionsâ€”such as bond refunding, capital investment, and lease versus buyâ€”involve discounting projected future cash flows. What factors must executives consider when choosing a discount rate to apply to forecasted cash flows? What is the present value of a perpetuity of $100 per year if the appropriate discount rate is 7 percent? What would happen to the present value of the perpetuity? a. What is the return expected on this investment measured in dollar terms if the opportunity cost rate is 10 percent? b. Provide an explanation, in economic terms, of your answer. c. What is the return on this investment measured in percentage terms? d. Should this investment be made?
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