Calculation of discount rate,
Calculation of NPV,
Year | Flow | Present value | Calculation |
1 | 3,000 | 2,504.6 | 3,000/(1+0.1978)1 |
2 | 3,000 | 2,091 | 3,000/(1+0.1978)2 |
3 | 3,000 | 1,745.7 | 3,000/(1+0.1978)3 |
4 | 3,000 | 1,457.42 | 3,000/(1+0.1978)4 |
5 | 3,000 | 1,216.75 | 3,000/(1+0.1978)5 |
Therefore the present equivalent worth of the investment is 9015.47, (2504.6 + 2091 + 1745.7 + 1457.42 + 1216.75)
PROBLEM A $10,000 investment would return a series of $3,000 year-end payments over the next 5...
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