Answer:
$18,017.29
Explanation:
The value can be found by calculating the present value of the cash flows.
Present value is the value of discounted cash flows.
Present value can be found using a financial calculator
Cash flows for year 1 and 2 = 0
Cash flows from year 3 to 12 = $4,000
Discount rate = 12%
Present value = $18,017.29
I hope my answer helps you
Answer:
The value of investment is $ 16,086.87
Explanation:
The maximum that an investor pays for any investment is the present value of all cash flows receivable from the investment.
In calculating value ,I multiplied the cash flow in each year with the discounting factor.The discounting factor is given as (1+r)^n,where r is the rate of return at 12%, n is the number of years from now when the cash inflow would be received.
At the end of the exercise I arrived at $16,086.87 as the present of value of the future cash flows as found in the attached.
