You are offered an investment with the following conditions: the cost of the investment is $1,000 and it pays out a sum of X at the end of the first year. The payout grows at the rate of 10% per year for 11 years, after which the payouts cease. If your discount rate is 15%, calculate the smallest X that would entice you to purchase the asset.

You are offered an investment with the following conditions: the cost of the investment is $1,000 and it pays out a sum of X at the end of the first year. The payout grows at the rate of 10% per year for 11 years, after which the payouts cease. If your discount rate is 15%, calculate the smallest X that would entice you to purchase the asset.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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