Question

Messi Company is considering an investment that will return a lump sum of $720,000 4 years from now.

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(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

What amount should Messi Company pay for this investment to earn an 9% return? (Round answer to 2 decimal places, e.g. 25.25.)

Messi Company should pay

$

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Answer 1

Since you have not given table , I am calculating factor value using calculator.

Future value of payment = $720000

Life = 4 year

Required return = 9%

Future value of $1 @9% for 4 years is 1.41158

So investment required today = $720000/1.41158

= $510066.73

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