Question

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

Answer 1

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