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if you are offered to receive $250, $300,$400,$500 and $650 at end of each year. the...

if you are offered to receive $250, $300,$400,$500 and $650 at end of each year. the first payment of 4250 is 2 years from now. if your money can earn 8% annual rate. how much you should pay for this deal?

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Answer #1

We need to find the present value of these cash flows.

PV = 4,250/(1 + 0.08)^2 + 250/1.08^3 + 300/1.08^4 + 400/1.08^5 + 500/1.08^6 + 650/1.08^7

PV = $5,029.243851552

We should pay $5,029.243851552 or less for this deal.

Can you please upvote? Thank You :-)

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