Question

You are considering the purchase of an investment that would pay you $66 per year for Years 1-4, $45 per year for Years 5-7, and $98 per year for Years 8-10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment? Show your answer to the nearest $.01. Do not use the $ sign in your answer.

Answer 1

Ans 345.09

Year	Project Cash Flows (i)	DF@ 14%	DF@ 14% (ii)	PV of Project A ( (i) * (ii) )
1	66	1/((1+14%)^1)	0.877	57.89
2	66	1/((1+14%)^2)	0.769	50.78
3	66	1/((1+14%)^3)	0.675	44.55
4	66	1/((1+14%)^4)	0.592	39.08
5	45	1/((1+14%)^5)	0.519	23.37
6	45	1/((1+14%)^6)	0.456	20.50
7	45	1/((1+14%)^7)	0.400	17.98
8	98	1/((1+14%)^8)	0.351	34.35
9	98	1/((1+14%)^9)	0.308	30.14
10	98	1/((1+14%)^10)	0.270	26.43
		PV		345.09