Answer :
Answer:
$13,522
Explanation:
We will be calculating the Present Value of the Principal thus:
[tex]PV = \frac{C}{(1 + r)^{n} }[/tex]
where:
C - cash flow = $42,000
r - rate = 12% (0.12)
n - number of years = 10 years
[tex]PV = \frac{42,000}{(1 + 0.12)^{10} }[/tex]
[tex]PV = \frac{42,000}{(1.12)^{10} }[/tex]
[tex]PV = \frac{42,000}{3.106}[/tex]
[tex]PV = 13,522[/tex]
Therefore the most the investor should be willing to pay for the investment is $13,522
Answer:
13,523
Explanation:
C - cash flow = $42,000
r - rate = 12% (0.12)
n - number of years = 10 years
PV= 42000/(1+0.12)10
PV= 13,522
Therefore the most the investor should be willing to pay for the investment is $13,522