Sarah just purchased an investment that will pay him $10,000, $20,000, and $12,000 over the next...

Sarah just purchased an investment that will pay him $10,000, $20,000, and $12,000 over the next three years. If she expects to earn 9% compounded annually, how much did she pay for the investment?

Expert Solution

Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.09^a	d=b*c
1	$ 10,000	0.917431	$ 9,174.31
2	$ 20,000	0.84168	$ 16,833.60
3	$ 12,000	0.772183	$ 9,266.20
Value of the investment			$ 35,274.11

jeff jeffy answered 2 years ago

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