Question

A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return

Answer 1

Answer:

$222,425

Explanation:

Present value = Amount / (1 + r)n

Amount is the amount receivable after 4 years, R = Rate of interest applicable or discount rate, n = Number of years

So, Present value = $350,000 / 1.12^4

Present value = $350,000 * 0.6355

Present value = $222,425

So, the company will have to pay $222,425 for this investment.