If you were offered the chance of an investment in a mango orchard in North Queensland and you were promised a return of $12 000 per year for ever,with the first payment being in one year from now,what is the maximum amount you would be prepared to pay for such an investment if you required a return of 14 per cent?

Question

Quizplus · Accepted Answer

To calculate the maximum amount you would be prepared to pay for the investment, you need to use the present value formula: PV = (annual payment amount) / (interest rate).
Plugging in the values, we get: PV = $12,000 / 0.14 = $85,714.29
Therefore, the maximum amount you should be prepared to pay for this investment is $85,714. Since this amount is closest to option C ($85,714), that is the best choice.

If You Were Offered the Chance of an Investment in a Mango