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

How much are you willing to invest in a machine that retums $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%? Ans $5,000 in years 1-4 and $5,000 in years 6-10.( $xxxxx

Solution

Year Returns PVF @12% Present Value 1 5000 0.892857 4464.286 2 5000 0.797194 3985.969 3 5000 0.71178 3558.901 4 5000 0.635518 3177.59 5 0 0.567427 0 6 5000 0.506631 2533.156 7 5000 0.452349 2261.746 8 5000 0.403883 2019.416 9 5000 0.36061 1803.05 10 5000 0.321973 1609.866 Present Value of Cash inflows 25414 The Investment required to be made is $ 25414