Goldman Investments has offered you the following investment opportunity: • $21,000 at the end of each...

Question

Question

Goldman Investments has offered you the following investment opportunity:

• $21,000 at the end of each year for the first 5 years. •

$7,800 at the end of each year from year 6 through 10.

How much would you be willing to pay for this investment if you require a 18% rate of return?

a) 61,594.57

b) 90,072.39

c) 78,029.95

d) 69,517.62

Answer 1

Answer #1

Using the NPV Function, we can calculate the Net present value of the investment. Which is the amount you should pay for the investment today.

The correct anwer is C. But that would be when we use an approx discount rate of 17.24% and not 18%.

Answer 2

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