You are valuing an investment that will pay you $26,000 per year for the first 9 years, $34,000 per year for the next 11 years, and $47,000 per year the following 14 years (all payments are at the end of each year). Another similar risk investment alternative is an account with a quoted annual interest rate of 9.00% with monthly compounding of interest. Required: Calculate the value in today's dollars of the set of cash flows you have been offered i.e. for each investment alternative, and decide which option is more profitable.
You are valuing an investment that will pay you $26,000 per year for the first 9 years, $34,000 per year for the next 11 years, and $47,000 per year the following 14 years (all payments are at the end of each year). Another similar risk investment alternative is an account with a quoted annual interest rate of 9.00% with monthly compounding of interest. Required: Calculate the value in today's dollars of the set of cash flows you have been offered i.e. for each investment alternative, and decide which option is more profitable.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 16P
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You are valuing an investment that will pay you $26,000 per year for the first 9 years,
$34,000 per year for the next 11 years, and $47,000 per year the following 14 years (all
payments are at the end of each year).
Another similar risk investment alternative is an account with a quoted annual interest rate of
9.00% with monthly compounding of interest.
Required:
Calculate the value in today's dollars of the set of cash flows you have been offered i.e.
for each investment alternative, and decide which option is more profitable.
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