Chapter AG, Problem G.10BE

To determine

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. The present value of an amount is calculated by using the following formula:

$\text{Present value of an amount = }\frac{\text{Future value}}{{\left(\text{1 + interest rate}\right)}^{\text{number}\text{of}\text{periods}}}$

To determine: The amount that Company M should pay for the investment to earn an 8% return.