Part A.
A limited partnership investment costs $51,000 and does not pay anything to the investor for the first two years, but then expects to pay $20,000 at the end of Year 3, $21,000 at the end of Year 4, and $57,000 at the end of Year 5. Assuming that the partnership actually pays those cash flows, what would be the net present value of this investment if the interest rate was 8.8%?
Part B.
An investment promises cash flows in years 1, 2, and 3 of $23,000. In years 4 and 5, it will pay $51,000. If your required rate of return is 7.2 percent, what is that worth today?