Please show working and explanation for me. You are valuing an investment that will pay you...

Please show working and explanation for me.

You are valuing an investment that will pay you $17,000 per year for the first ten years, $35,000 per year for the next ten years, and $48,000 per year the following ten years (all payments are at the end of each year). If the appropriate annual discount rate is 9.00%, what is the value of the investment to you today (in whole number)?

Solutions

Expert Solution

The value of the investment today can be found using the present value method which will discount all the future cash flows to its present value using an appropriate discount rate.

The equation to find the present value of the cash flows is as below

where C₁ , C₂ , C₃ represent the cash flow in year 1, 2 & 3 and C_n represents the cash flow in year n .

Using the above equation, the present value of the cash flows in calculated as follows

The value of the investment today = $ 258,947

jeff jeffy answered 2 weeks ago

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