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An investment pays out $20,000 at the end of the year, followed by payments of $30,000,...

  1. An investment pays out $20,000 at the end of the year, followed by payments of $30,000, $40,000, and $50,000 at the end of the subsequent years. Yields in the market are expected to steadily increase. The discount rate for the first year is 6%, for the second year is 7%, for the third year is 8%, and for the fourth year is $9%. How much would you be willing to pay for this investment? Please show all calculations in excel!
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Answer #1

present value = future value / (1 + yield)n

where n = number of years

Amount willing to pay for investment = sum of present values of all payments

The discount rate for Year 1 is 6%, Year 2 is 7% and so on.

Amount willing to pay for investment = $115,421.18

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