John has an investment opportunity that promises to pay him $16,000 in four years. He could earn a 6% annual return investing his money elsewhere. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the maximum amount he would be willing to invest in this opportunity? (Round your final answers to nearest whole dollar amount.)
John has an investment opportunity that promises to pay him $16,000 in four years. He could earn a 6% annual return investing his money elsewhere. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) What is the maximum amount he would be willing to invest in this opportunity? (Round your final answers to nearest whole dollar amount.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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John has an investment opportunity that promises to pay him $16,000 in four years. He could earn a 6% annual
What is the maximum amount he would be willing to invest in this opportunity? (Round your final answers to nearest whole dollar amount.)
Expert Solution
Step 1: Determine the present value factor using the 6%.
| Year | PV factor @ 6% | Remarks |
| 1 | 0.94340 | = 1 / 1.06 |
| 2 | 0.89000 | = 0.9434 / 1.06 |
| 3 | 0.83962 | = 0.89 / 1.06 |
| 4 | 0.79209 | = 0.83962 / 1.06 |
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