Final answer:
The present value of an investment offering $9,149 per year for 23 years at a 4.5% return can be calculated using the present value of annuity formula. By plugging in the values into the formula, one can find out the investment's worth today.
Step-by-step explanation:
The student is asking how to determine the present value of an investment that offers $9,149 per year for 23 years with a required return of 4.5%. This can be calculated using the formula for the present value of an annuity:
PV = PMT × ((1 - (1 + r)^{-n}) / r)
Where:
- PV is the present value
- PMT is the annual payment ($9,149)
- r is the annual discount rate (4.5%, or 0.045 as a decimal)
- n is the number of periods (23 years)
Plugging in the values we get:
PV = $9,149 × ((1 - (1 + 0.045)^{-23}) / 0.045)
Executing the calculation will give us the value of the investment.