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Jacklyn Linetsky recently purchased a 10-year investment which pays $100 at t = 1, $200 at...

Jacklyn Linetsky recently purchased a 10-year investment which pays $100 at t = 1, $200 at t = 2, $500 at t = 3, and some fixed cash flow, X, at the end of each of the remaining 7 years. The investment cost her $7250. Alternative investments of equal risk have a required return of 8.5 percent. What is the annual cash flow received by Jacklyn at the end of each of the final 7 years, that is, what is X?
Hit: To solve this question, use “Goal Seek” in Tools Menu. Go to Data and then Click on What-If Analysis and then Click on Goal Seek and enter the required entry.
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Homework Answers

Answer #1

First set up a quick model as shown below:

I will show you the snapshot in formula mode so that you know how to set this up:

Now do a goal seek:

Output of goal seek:

Hence, the answer is X = 1,646 (or 1,646.11 to be precise)

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