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An investment offers $2,374 per year for 13 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment
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15 votes
15 votes
An investment offers $2,374 per year for 13 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment

User D C
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1 Answer

24 votes
24 votes

Answer:

PV= $18,763.56

Step-by-step explanation:

Giving the following information:

Annual payment (A)= $2,374

Number of payments= 13

Discount rate (i)= 8%

To calculate the present value, we need to use the following formula:

PV= A*{(1/i) - 1/[i*(1 + i)^n]}

PV= 2,374*{(1/0.08) - 1 / [(0.08*(1.08^13)}}

PV= $18,763.56

User NiceTheo
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