Question

Flaherty is considering an investment that, if paid for immediately, is expected to return $140,000 five years from now. If Flaherty demands a 9% return, how much is she willing to pay for this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1)

Answer 1

PV= $90,990.39

Step-by-step explanation:

Giving the following information:

Future value= $140,000

Number of periods= 5 years

Rate of return= 9%

To calculate the price to pay today, we need to calculate the present value. We will use the following formula:

PV= FV/(1+i)^n

PV= 140,000 / (1.09^5)

PV= $90,990.39