How much are you willing to invest in a machine that returns

How much are you willing to invest in a machine that returns $5,000 in years 1-4 and $5,000 in years 6-10 (there is no return in year 5 due to a temporary plant shut down) if the interest rate is 12%?

Solution

return (annual) = $ 5000

r = 12%

PV = 5000/(1 + 12%) + ... + 5000/(1 + 12%)¹⁰ - 5000/(1 + 12%)⁵

PV = $ 25413.98 (amount that one would be willing to invest)