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Novay_Z [31]
3 years ago
10

An investment offers $5,900 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? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Business
1 answer:
drek231 [11]3 years ago
4 0

Answer:

Today, the investment is worth $31,997.29

Explanation:

Giving the following information:

An investment offers $5,900 per year for 15 years, with the first payment occurring one year from now. The required return is 6 percent

First, we need to calculate the final value, using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual pay= 5,900

n= 15

i= 0.06

FV= {5,900*[(1.06^15)-1]} / 0.06= $137,328.22

Now, we can determine the present value:

PV= FV/ (1+i)^n

PV= 137,328.22/ 1.06^25= $31,997.29

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