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You are considering the purchase of an investment that would pay you $55 per year for...

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Finance

You are considering the purchase of an investment that would payyou $55 per year for Years 1-4, $30 per year for Years 5-7, and $68per year for Years 8-10. If you require a 14 percent rate ofreturn, and the cash flows occur at the end of each year, then howmuch should you be willing to pay for this investment? Show youranswer to the nearest $.01. Do not use the $ sign in youranswer.

Answer & Explanation Solved by verified expert
3.8 Ratings (614 Votes)
Willing to pay Present value of cash inflows Present value of first set of cash inflows Annuity 1 1 1 rn r Present value of first set of cash inflows 55 1 1 1    See Answer
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Transcribed Image Text

You are considering the purchase of an investment that would payyou $55 per year for Years 1-4, $30 per year for Years 5-7, and $68per year for Years 8-10. If you require a 14 percent rate ofreturn, and the cash flows occur at the end of each year, then howmuch should you be willing to pay for this investment? Show youranswer to the nearest $.01. Do not use the $ sign in youranswer.

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