You are considering the purchase of an investment that would pay you $5,000 per year for Years 1-5,$3,000 per year for Years 6-8,and $2,000 per year for Years 9 and 10.If you require a 14% 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?
A) $15,819.27
B) $21,937.26
C) $32,415.85
D) $38,000.00
E) $52,815.71

Question

Quizplus · Accepted Answer

NPV = 11ea7fdb_fbe1_8ee4_a768_d3b155ad94ed_TB2902_11 11ea7fdb_fbe1_8ee5_a768_6329c400bca5_TB2902_11 - Initial Investment
NPV = 11ea7fdb_fbe1_8ee6_a768_81f71939830c_TB2902_11 + 11ea7fdb_fbe1_b5f7_a768_7f71b7edd9a7_TB2902_11 + 11ea7fdb_fbe1_b5f8_a768_2bbfd87d9b93_TB2902_11 + 11ea7fdb_fbe1_b5f9_a768_73b47a8fc522_TB2902_11 + 11ea7fdb_fbe1_b5fa_a768_f5158de4e2ca_TB2902_11 + 11ea7fdb_fbe1_b5fb_a768_0d81dc78bfba_TB2902_11 + 11ea7fdb_fbe1_b5fc_a768_a36cc519b1d6_TB2902_11 + 11ea7fdb_fbe1_dd0d_a768_21518c874383_TB2902_11 + 11ea7fdb_fbe1_dd0e_a768_f3c76ccaae90_TB2902_11 + 11ea7fdb_fbe1_dd0f_a768_2b3daaa66ce1_TB2902_11 - 0 = $21,937.26
Using a financial calculator: CF0 = 0, C01 = 5,000, F01 = 5 C02 = 3,000, F02 = 3, C03 = 2,000, F03 = 2, NPV I = 14
CPT NPV = $21,937.26

You Are Considering the Purchase of an Investment That Would