Question

27) You are valuing an investment that will pay you nothing the first two years, $18,000...

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

Homework Answers

Answer #1

$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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