An investment promises to pay you $400 per year starting in 5 years. The cash flow from the investment is expected to increase by 2 percent per year forever. If alternative investments of similar risk earn a return of 9 percent per year, determine the maximum you would be willing to pay for the investment. (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.) Maximum amount you would be willing to pay $

An investment promises to pay you $400 per year starting in 5 years. The cash flow from the investment is expected to increase by 2 percent per year forever. If alternative investments of similar risk earn a return of 9 percent per year, determine the maximum you would be willing to pay for the investment. (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.) Maximum amount you would be willing to pay $

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Please show work.thank you
Your finance advisor offers you an investment that promise $200000 in 15 years from now. He said that you will need to contribute an initialinvestment of $45,000 now. Required:a. What rate of interest was used in the computation of this investment offerassuming the rate is compounding annually?b. If you wish to retire in just 10 years from now with the same $200 000and the rate of return is 12%, how much money would you need to invest now?c. If you wish to retire with $250 000, using the same initial investment of$45 000 and the rate of return of 15%, how long will you need to wait beforeyou can retire?
An investment has a cost of $3500. The investment will have a payout of X at the end of the first year. This initial payout X will grow at the rate of 12% per year for the next 4 years, then by 7% per year for the next 4 years, and then at the rate of 3% per year for the following 3 years. You believe the riskiness of this investment is 9%. Calculate the smallest X that would entice you to invest.
A simple formula can help you estimate the number of years required to double your money. It's called the Rule of 72. You simply divide 72 by the interest rate (without the percent sign). For example, with an interest rate of 4%, your money will double in 72/4, or 18 years. For your initial post 1. Select one of the following questions to answer: If I invest $1000 at 3% interest, how long will take for my money to double? If I invest $1000 at 6% interest, how long will take for my money to double? If I invest $1000 at 8% interest, how long will take for my money to double? If I invest $1000 at 12% interest, how long will take for my money to double? 2. Select one of the following questions to answer: If $120 doubles in approximately 13 years, what is the interest rate? If $120 doubles in approximately 19 years, what is the interest rate? If $120 doubles in approximately 23 years, what is the interest rate? Answer the two questions in the instructions. You must include calculations…
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $40,000 per year forever. If the required return on this investment is 6.3 percent, how much will you pay for the policy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
You are thinking about investing in a project that will provide you a cash flow of $78922 in 3 years and of $88519 in 4 years. If your required return on investments of this risk is 15.14%, how much are you willing to pay for this opportunity? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $842 in 7 years. If your required return on investments of this risk is 13.2%, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:
Double your money-Rule of 72. Approximately how long will it take to double your money if you get an annual return of 4.6%, 7.1%, or 10 4% on your investment? Approximately how long will it take to double your money if you get a 4.6% annual return on your investment? years (Round to two decimal places.)
(Use Calulator or Formula Approach) You are offered an investment that will pay you $200 in one year, $400 the next year, $600 the next year and $800 at the end of the fourth year. You can earn 12 percent on very similar investments. What is the most you should pay for this one?
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $996 in 6 years. If your required return on investments of this risk is 16.5%, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate.
Hi, You have been approached to buy an investment which will pay you $1,000 at the end of 4years. The investment will also pay you $30 per annum (at the end of each year) as well.How much is this investment worth today? Assume interest rate of 8%How should i approach this? is the $30 per annum included in the PV?Thanks.
Give only typing answer with explanation and conclusion

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS