27) You are valuing an investment that will pay you nothing the first two years, $18,000 the third year, $20,000 the fourth year, $24,000 the fifth year, and $30,000 (all payments are at the end of each year). What is the value of the investment to you now if the appropriate annual discount rate is 13.00%?
$102,414.54 |
$40,588.54 |
$92,000.13 |
$74,756.75 |
$52,177.07 |
$52,177.07
Working:
Year | Cash flows | Discount factor | Present Value | |||
a | b | c=1.13^-a | d=b*c | |||
3 | $ 18,000 | 0.6931 | $ 12,474.90 | |||
4 | $ 20,000 | 0.6133 | $ 12,266.37 | |||
5 | $ 24,000 | 0.5428 | $ 13,026.24 | |||
6 | $ 30,000 | 0.4803 | $ 14,409.56 | |||
Total | $ 52,177.07 | |||||
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