Question

A Asset Valuation = Price B Wealth Accumulation C Funding – Lump sum funds lump sum D Funding – Lump sum funds ordinary level annuity E Funding – Lump sum funds delayed level annuity F Funding – Ordinary level annuity funds lump sum G Funding – Ordinary level annuity funds delayed level annuity H Choosing Among Alternatives Classify the problem as one of the above types. Choose Only One You are thinking about buying a business that you expect will provide you with income of $100,000 per year for 20 years. Since this is a “start-up” business, it will not begin providing you income until 5 years from now. If market interest rates are 5% APR, compounded annually, how much would you pay for this asset today?

Answer 1

buying a business that you expect will provide you with income of $100,000 per year for 20 years. Since this is a “start-up” business, it will not begin providing you income until 5 years from now. If market interest rates are 5% APR, compounded annually,how much would you pay for this asset today?

Funding – Lump sum funds delayed level annuity

In this, first, we have to Pay for the asset(Lump sum Funding), then the cashflows(income) $100,000 per year for 20 years but it will not provide income untill 5 years from now(delayed level annuity)