Deshauan has an investment worth $185000. The invesment will make a special payment of x to...

Deshauan has an investment worth $185000. The invesment will make a special payment of x to him in three years from today. The investment also will make regular, fixed annual payments of #34000 to him with the first of these payments made to him later today and the last of these annual payments made to him in five years from today. The expected retrun for thi investment is 9.30 percent per year. What is x the amount of the special payment that will be made to him in three yrs?

An amount equal to or greater than ______ but less than __________.

Solutions

Expert Solution

Investment = PV of CFs from it.

Year	CF	PVF @9.3%	Disc CF
0	$ 34,000.00	1.0000	$ 34,000.00
1	$ 34,000.00	0.9149	$ 31,107.04
2	$ 34,000.00	0.8371	$ 28,460.24
3	34000+X	0.7658	26037.2 + 0.7658X
4	$ 34,000.00	0.7007	$ 23,823.10
5	$ 34,000.00	0.6411	$ 21,796.07
Investment Today	165223.65+0.7658X

Thus 165223.65 + 0.7658X = 185000

0.7658X = 185000 - 165223.65

= 19776.35

X = 19776.35 / 0.7658

= 25824.43

Pls do rate, if the answer is correct and comment, if any further assistance is required.

jeff jeffy answered 2 years ago

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