‏AKA is investing $ 10,000 per year 1 through year 5 at i = 10 %...

‏AKA is investing $ 10,000 per year 1 through year 5 at i = 10 % and $ 16,000 for three years after at i = 14 % . The present worth of this investment is :

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Expert Solution

Investment from year 1 to year 5 is $10,000 at 10% while investment from year 6 to 8 is $16,000 per year at 14%

Present worth is calculated as: [Investment / (1 + Rate of Interest)^Year

Present value of Investment made in 1st year = [10,000 / (1 + 0.1)^1] = 9,090.9

Present value of Investment made in 2nd year = [10,000 / (1 + 0.1)^2] = 8,264.46

Present value of Investment made in 3rd year = [10,000 / (1 + 0.1)^3] = 7,513.14

Present value of Investment made in 4th year = [10,000 / (1 + 0.1)^4] = 6,830.13

Present value of Investment made in 5th year = [10,000 / (1 + 0.1)^5] = 6,209.21

Present value of Investment made in 6th year = [16,000 / (1 + 0.14)^6] = 7,289.38

Present value of Investment made in 7th year = [16,000 / (1 + 0.14)^7] = 6,394.19

Present value of Investment made in 8th year = [16,000 / (1 + 0.14)^8] = 5,608.91

Sum of present value of all investment made in various years is 57,200.39

Rahul Sunny answered 1 year ago

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