+0  
 
0
137
1
avatar

An investment offers $5,600 per year for 15 years. with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment today? what is the present value? what is the value today if the payments occurred for 40 years? what would the value be today if the payments occurred for 75 years? What would the payment be today if if the payments occurred forever?

Guest Apr 17, 2017
Sort: 

1+0 Answers

 #1
avatar
0

Use the following formula to find the PV:

PV=P{[1 + R]^N - 1 / [1 + R]^-N} / R 

PV =5,600 x {[1 + 0.06]^15 - 1 / [1+0.06]^15} / 0.06

PV =5,600 x                         9.71224899........

PV =$54,388.59 for 15 years.

Use the same formula as above but change the exponent to 40 years and you should get:

PV =$84,259.26 for 40 years.

PV =$92,152.75 for 75 years.

PV =$5,600 / 0.06 =$93,333.33 Perpetual annuity, or payments forever.

Guest Apr 17, 2017

19 Online Users

avatar
avatar
avatar
avatar
avatar
We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners.  See details