# You are considering the purchase of an investment that would pay you $5000 per year for years...

## Question:

You are considering the purchase of an investment that would pay you $5000 per year for years 1-5, 3000 per year for years 6-8, and 2000 per year for years 9 and 10. If you require a 14% rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment? Step by step solution.

## Answer and Explanation: 1

Become a Study.com member to unlock this answer! Create your account

View this answera. We should be willing to pay $21,937.26 for this investment

- Cash flow in year 1 - 5 = $5,000
- Cash flow in year 6 - 8 = $3,000
- cash flow in year 9 -...

See full answer below.

#### Ask a question

Our experts can answer your tough homework and study questions.

Ask a question Ask a question#### Search Answers

#### Learn more about this topic:

from

Chapter 6 / Lesson 1The value of investments changes over time, and this can be applied to multiple cash flows. Identify how to calculate both the present and future values applied specifically to cash flows.

#### Related to this Question

- You are considering the purchase of an investment that would pay you $38 per year for Years 1-4, $79 per year for Years 5-7, and $43 per year for Years 8-10. If you require a 14% rate of return, and t
- You are considering the purchase of an investment that would pay you $57 per year for Years 1-4, $59 per year for Years 5-7, and $39 per year for Years 8-10. If you require a 14 percent rate of return
- Assume that you are paying $1,000 to buy an asset that will pay $100 at the end of year one, $300 at the end of each of the following three years, and $500 at the end of the fifth year. Compute the rate of return on the investment.
- You have $15,750 you want to invest for the next 34 years. You are offered an investment plan that will pay you 9% per year for the next 17 years and 13% per year for the last 17 years. How much will
- You have $20,000 you want to invest for the next 40 years. You are offered an investment plan that will pay you 7% per year for the next 20 years and 11% per year for the last 20 years. How much will you have at the end of 40 years? Does it matter if the
- An investment promises to pay $3,500 per year for the next 3 years and then $4,000 per year for the following two years. Assume a discount rate of 15% per year, how much should you pay for this inves
- You have $18,500 you want to invest for the next 32 years. You are offered an investment plan that will pay you 6% per year for the next 16 years and 10 percent per year for the last 16 years. a. How much will you have at the end of the 32 years? b. If t
- You are looking into an investment that will pay you $12,000 per year for the next 10 years. If you require a 15 percent return, what is the most you would pay for this investment?
- You are considering an investment that will pay $250 after 1 year, $500 after 2 years, and $650 after 3 years. What is the present value of the cash flows if the appropriate discount rate is 8% per year?
- You have $19,750 you want to invest for the next 22 years You are offered an investment plan that will pay you 9 percent per year for the next 11 years and 13 percent per year for the last 11 years. 1: How much will you have at the end of the 22 years? 2
- Suppose that you are evaluating two investments, both of which require you to pay $5,500 today. Investment A will pay you $7,020 in 5 years, whereas Investment B will pay you $8126 in 8 years. a. Base
- You are considering an investment that will pay you $1,428 in one year, $2,033 in two years, and $3,947 in three years. If you want to earn 12% of your money, how much will you be willing to pay?
- You are considering an investment which would entail $5,000 payments each year for 20 years. The investment will pay 7 percent interest. How much will this investment be worth at the end of the 20 yea
- You are offered an investment that will pay you $235 in one year, $450 the next year, and $600 at the end of the third year. How much is this investment worth if the interest rate is 10%?
- You are considering buying an investment that will be worth $55,000 when it matures in four years. If you want a rate of return of at least 15% compounding annually, what is the most you should be wil
- Investment X offers to pay you $6,300 per year for 9 years, whereas Investment Y offers to pay you $9,000 per year for 5 years. Requirement 1: (a) If the discount rate is 8%, what is the present value
- a) Investment X offers to pay you $6,100 per year for 9 years, whereas Investment Y offers to pay you $8,700 per year for 5 years. If the discount rate is 5 percent, what is the present value of these
- Investment X offers to pay you $7,700 per year for 9 years, whereas Investment Y offers to pay you $10,600 per year for 5 years. 1: (a) If the discount rate is 7 percent, what is the present value of
- An investment promises to pay you $500 one year from now, $1,000 two years from now, and 5,000 three years from now. If you require a 10% rate of return on this investment, how much would you pay for
- How much would you be willing to pay today for an investment that pays $700 a year at the end of the next 5 years? Note that the required rate of return is 8% a year.
- Investment X offers to pay you $6,900 per year for 9 years, whereas Investment Y offers to pay you $9,300 per year for 5 years. Requirement: If the discount rate is 21 percent, what is the present v
- Investment X offers to pay you $4,800 per year for 9 years, whereas Investment Y offers to pay you $7,100 per year for 5 years. a) If the discount rate is 6 per cent, what is the present value of the
- If you invest $5,000 today, you will receive $1,000 in a year, $1,500 each in year 2 and year 3, and $2,000 each in year 4 and year 5. If you require a 10% annual return, should you take the investment?
- Consider a house = $125,000. If you want to buy this house in 10 years, it is expected to increase 5% a year over a 10 year period, assuming you can earn 10% annually on investment. How much should yo
- You are scheduled to receive $20,000 in 4 years. When you receive the money, you will invest it for 10 more years at 8% a year. How much will you have in 14 years? Assuming the same discount rate, wha
- You invest $20,000 today, $5,000 at the end of year one, $3,000 at the end of year 2, and $5,000 at the end of year 5. The interest rate is 8% per year period How much money will you have at the end o
- You are considering an investment which will pay $5,000 a year for 25 years, starting 1 year from today, how much should you pay for this investment if you wish to earn a 7.5% rate of return?
- Investment X offers to pay you $6,000 per year, for 9 years, whereas Investment Y offers to pay you $8,200 per year, for 5 years. If the discount rate is 8%, what is the present value of these cash fl
- Assuming a 6% discount rate, how much would you need to invest now to have $100,000 in 10 years with no additional investment?
- You are considering an investment that costs $152,000 and has projected cash flows of $71,800, $86,900, and -$11,200 for years 1 to 3, respectively. If the required rate of return is 15.5 percent, sho
- You are considering investing in a security that will pay you $2,000 in 27 years. If the appropriate discount rate is 8%, what is the present value of this investment? Assume these investments sell fo
- Investment X offers to pay you $3,400 per year for 9 years, whereas Investment Y offers to pay you $5,200 per year for 5 years. Which of these cash flow streams has the higher percent value if the if
- Investment X offers to pay you $4,900 per year for 9 years, whereas Investment Y offers to pay you $6,500 per year for 5 years. 1: (a) If the discount rate is 5 percent, what is the present value of
- You are valuing an investment that will pay you $26,000 per year for the first 9 years, $34,000 per year for the next 11 years, and $47,000 year the following 14 years (all payments are the end of eac
- A 6-year investment will pay $1,500 at the end of this year, and the payments will grow at a rate of 3% per year. The required return is 10%. What is the present value of this investment? a. $6,532.89 b. $6,985.47 c. $7,195.03 d. $21,428.57 e. There
- An investment offers to pay you $10,000 a year for 5 years. If it costs $33,520, what will be your rate of return on the investment?
- You will receive $5,000 three years from now. The discount rate is 12%. a. What is the value of your investment two years from now? Multiply $5,000 x .893 (one year's discount rate at 12%). (Round you
- You have $18,500 you want to invest for the next 32 years. You are offered an investment plan that will pay you 6 percent per year for the next 16 years and 10 percent per year for the last 16 years. a. How much will you have at the end of the 32 years?
- Investment X offers to pay you $7,300 per year for 9 years, whereas Investment Y offers to pay you $9,800 per year for 5 years. If the discount rate is 5 percent, what is the present value of these cash flows?
- Investment X offers to pay you $4,300 per year for 9 years, whereas Investment Y offers to pay you $6,100 per year for 5 years. If the discount rate is 6 percent, what is the present value of these cash flows?
- Investment X offers to pay you $7,300 per year for 9 years, whereas Investment Y offers to pay you $9,800 per year for 5 years. If the discount rate is 23 percent, what is the present value of these cash flows?
- Investment X offers to pay you $5,800 per year for 9 years, whereas Investment Y offers to pay you $8,600 per year for 5 years. If the discount rate is 5%, what is the present value of these cash flow
- Investment X offers to pay you $5,100 per year for 9 years, whereas Investment Y offers to pay you $7,500 per year for 5 years. If the discount rate is 6%, what is the present value of these cash flow
- Investment X offers to pay you $4,600 per year for 9 years, whereas Investment Y offers to pay you $6,700 per year for 5 years. If the discount rate is 4%, what is the present value of these cash flow
- Consider an investment that costs $100,000 and a has a cash inflow of $25,000 every year for 5 years. The required return is 9% and the required payback is 4 years. What is the payback period? What is
- You are told that if you invest $11,000 per year for 23 years (all payments made at the end of each year) you will have accumulated $366,000 at the end of the period. What annual rate of return is the investment offering?
- Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,600 per year for 18 years. The cost of purchasing this investment is $9,200. You have an alte
- Suppose that you are approached with an offer to purchase an investment that will provide cash flows of $1,300 per year for 15 years. The cost of purchasing this investment is $9,200. You have an alte
- Investment X offers to pay you $5,300 per year for 9 years, whereas Investment Y offers to pay you $7,200 per year for 5 years. If the discount rate is 7 percent, what is the present value of these ca
- Investment X offers to pay you $5,100 per year for 9 years, whereas Investment Y offers to pay you $7,500 per year for 5 years. If the discount rate is 6 percent, what is the present value of these ca
- Investment X offers to pay you $4,500 per year for 9 years, whereas Investment Y offers to pay you $6,200 per year for 5 years. If the discount rate is 7 percent, what is the present value of these c
- Investment X offers to pay you $5,500 per year for 9 years, whereas Investment Y offers to pay you $7,900 per year for 5 years. If the discount rate is 5 percent, what is the present value of these ca
- Investment X offers to pay you $4,700 per year for 9 years, whereas Investment Y offers to pay you $6,800 per year for 5 years. If the discount rate is 5 percent, what is the present value of these ca
- Investment X offers to pay you $6,000 per year for nine years, whereas Investment Y offers to pay you $8,000 per year for six years. If the discount rate is 5 percent, a) what is the present value o
- Investment X offers to pay you $4,900 per year for 9 years, whereas Investment Y offers to pay you $7,500 per year for 5 years. If the discount rate is 3 percent, what is the present value of these ca
- Investment X offers to pay you $5,000 per year for 9 years, whereas Investment Y offers to pay you $7,400 per year for 5 years. 1. If the discount rate is 5 percent, what is the present value of the
- Investment X offers to pay you $4,800 per year for 9 years, whereas Investment Y offers to pay you $7,200 per year for 5 years. a. If the discount rate is 4 percent, what is the present value of thes
- Suppose it is now January 1, 2008, and you just sold an investment that you own for $12,500. You purchased the investment four years ago for $10,500. During the time you held the investment, it paid income equal 21,000 each year. What is the four-year hol
- Investment X offers to pay you $5,500 per year for 9 years, whereas Investment Y offers to pay you $8,000 per year for 5 years. A) If the discount rate is 8%, what is the present value of these cash f
- Investment X offers to pay you $8,800 per year for 10 years, whereas Investment Y offers to pay you $12,000 per year for 7 years. Assuming 9% discount rate, what are the present values for these cash flows? Which one is more valuable?
- We have an investment of $15,000 on which we receive $1,000 yearly, as well as $20,000 7 years later. Compute the interest rate on the investment.
- How much more would you be willing to pay today for an investment offering $15,000 in 4 years rather than the normally advertised 5-year period? Your discount rate is 7%.
- How much more would you be willing to pay today for an investment offering $12,000 in 4 years rather than the normally advertised 5-year period? Your discount rate is 9%.
- What is the most you would be willing to pay for a investment that will pay you $659 in one year, $709 in two years, and $149 in three years, if your required rate of return for this type of investmen
- What is the most you would be willing to pay for a investment that will pay you $233 in one year, $99, in two years, and $588 in three years, if your required rate of return for this type of investmen
- You are being offered an investment that will pay you (and your heirs) $16,964 per year forever, starting 11 years from now. If your discount rate on this investment is 8.6%, how much would you be wil
- Consider an investment that costs $50,000 and has a cash inflow of $40,000 every year for 5 years. The required return on the investment is 8%. Find the NPV of the investment and determine if it should be purchased.
- You will receive $5,000 three years from now. The discount rate is 8%. What is the value of your investment one year from now?
- You will receive $5,000 three years from now. The discount rate is 8%. What is the value of your investment 2 years from now?
- You invest $1,000 a year for ten years at 8 percent and then invest $2,000 a year for an additional ten years at 8 percent. How much will you have accumulated at the end of the 20 years?
- Consider an investment that cost $150,000 and has a cash inflow of $40,000 every year for 5 years. The required return on the investment is 8%. Find the NPV of the investment and determine if it should be purchased.
- Investment X offers to pay you $7,900 per year for 9 years, whereas Investment Y offers to pay you $10,800 per year for 5 years. A) If the discount rate is 8 percent, what is the present value of these cash flows? B) If the discount rate is 20 percent, wh
- Your firm is considering an investment that will cost $920000 today. The investment will produce cash flows of $450000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount ra
- A firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount
- Your firm is considering an investment that will cost $920,000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount
- Your firm is considering an investment that will cost $920000 today. The investment will produce cash flows of $450,000 in year 1, $270,000 in years 2 through 4, and $200,000 in year 5. The discount r
- X wants to sell you an investment contract that pays equal $ 14,000 amounts at the end of each of the next 20 years. If you require an effective annual return of 8 percent on this investment, how much
- An investment will pay you $300 a year for 8 years, (I.e., 8 payments), starting 4 years from today. What is the present value of the investment at a discount rate of 6%?
- Investment X offers to pay you $3,400 per year, for nine years, whereas Investment Y offers to pay you $5,200 per year, for five years. Which of these cash flow streams has the higher present value, i
- 1. We have an investment of $15,000 on which we receive $1,000 yearly, as well as $20,000 7 years later. Compute the interest on that investment. 2. We invest $10,000 for 10 years. We receive $14,000
- You are considering buying an investment that will be worth $55,000 when it matures in two years. If you want a rate of return of at least 15% compounding quarterly, what is the most you should be wil
- Investment X offers to pay you $4,700 per year for eight years, whereas Investment Y offers to pay you $6,700 per year for five years. a. Which of these cash flow streams has the higher present value
- Investment X offers to pay you $6, 900 per year for 9 years. Whereas Investment Y offers to pay you $9, 300 per year for 5 years. Which of these cash flow streams has the higher present value at 21 percent?
- Investment X offers to pay you $5,200 per year for eight years, whereas investment Y offers to pay you $7,300 per year for five years. Which of these cash flow streams has a higher present value if th
- Investment X offers to pay you $6, 900 per year for 9 years. Whereas Investment Y offers to pay you $9, 300 per year for 5 years. Which of these cash flow streams has the higher present value at 7 percent?
- Investment X offers to pay you $3,400 per year for nine years, whereas Investment Y offers to pay you $5,200 per year for five years. a. Which of these cash flow streams has the higher present value i
- You deposit $2,000 at the end of year 2 (i.e., in 2 years) and then $3,000 at the end of year 4. What will you have at the end of year 7 if you can earn 5% per year on the investment? Show all work.
- An investment offers $7,700 per year for 14 years, with the first payment occurring 1 year from now. Assume the required return is 8 percent. What is its value today? After payments for 39 years? 74 y
- Investment X ofers to pay you 4700 per year for eight years. Whereas investment Y offers to pay you 6700 per year for five years. Which of these cash flow streams has the higher present value if the
- You are going to choose between two mutually exclusive investments. Both cost $80,000 but investment A pays $35,000 per year for four years while investment B pays $30,000 per year for five years. If
- An investment promises cash flows in years 1, 2, and 3 of $31,000. In years 4 and 5, it will pay $32,000. If your required rate of return is 13.4 percent, what is the investment worth today?
- You are considering an investment which has the following cash flows. If you require a 4 year payback, should you take the investment? | Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | Cash flow | -35000 | 1
- Suppose you want to have $2,000,000 when you retire in 30 years. Assume you will earn 8% per year on your investments. How much would you have to invest at the end of each year for the next 30 years to reach your $2,000,000 goal?
- An investment produces a cash flow of $420 in year 1, $137 in year 2, and $797 in year 3. If the required rate of return is 15%, what price should you pay for the investment at time zero?
- 1. We have an investment of $15,000 on which we receive $1,000 yearly, as well as $20,000 7 years later. Compute the i on that investment. 2. We invest $10,000 for 10 years. We receive $14,000 10 year
- 1) We have an investment of $15,000 on which we receive $1,000 yearly, as well as $20,000 7 years later. Compute the i on that investment. 2) We invest $10,000 for 10 years. We receive $14,000 10 yea
- You have $20,000 you want to invest for the next 40 years. You are offered an investment plan that will pay you 7 percent per year for the next 20 years and 11 percent per year for the last 20 years.
- You have $19,500 you want to invest for the next 24 years. You are offered an investment plan that will pay you 6 percent per year for the next 12 years and 10 percent per year for the last 12 years.
- You have $5,000 you want to invest for the next 45 years. You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.
- You have $18,500 you want to invest for the next 32 years. You are offered an investment plan that will pay you 6 percent per year for the next 16 years and 10 percent per year for the last 16 years.