Question

Flaherty is considering an investment that, if paid for immediately, is expected to return $146,000 five years from now. If Flaherty demands a 15% return, how much is she willing to pay for this investment? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round PV factor to 4 decimals.)

Answer 1

Answer:

PV= $72,587.80

Explanation:

Giving the following information:

Flaherty is considering an investment that, if paid for immediately, is expected to return $146,000 five years from now.

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

PV= FV/(1+i)^n

FV= $146,000

Interest rate= 15% = 0.15

Number of periods= 5

PV= 146,000 / (1.015^5)

PV= $72,587.80