You are considering the purchase of an investment. What is the MOST you would be willing to pay for this investment?
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You are considering the purchase of an investment that would pay you $5,000 per year for Years 1 5, $3,000 per year for Years 6 8, and $2,000 per year for Years 9 and 10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then what is the MOST you would be willing to pay for this investment?
a. $15,819.27
b. $21,937.26
c. $32,415.85
d. $38,000.00
e. $52,815.71
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Solution Summary
The solution explains how to determine the maximum price to be paid for an investment using the present value calculation.
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What we are willing to pay is the present value of the cash flows ...
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