Question

1) You are looking into an investment that will pay you $12,000 per year for the next 10 years. If you require a 15% return, what is the most you would pay for this investment?

Answer 1

Value of Investment = PV of CFs from it.

Year	CF	PVF @15%	Disc CF
1	$ 12,000.00	0.8696	$ 10,434.78
2	$ 12,000.00	0.7561	$   9,073.72
3	$ 12,000.00	0.6575	$   7,890.19
4	$ 12,000.00	0.5718	$   6,861.04
5	$ 12,000.00	0.4972	$   5,966.12
6	$ 12,000.00	0.4323	$   5,187.93
7	$ 12,000.00	0.3759	$   4,511.24
8	$ 12,000.00	0.3269	$   3,922.82
9	$ 12,000.00	0.2843	$   3,411.15
10	$ 12,000.00	0.2472	$   2,966.22
Value of Investment			$60,225.22

Value of Investment is $ 60,225.22