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28 October, 04:59

Flaherty is considering an investment that, if paid for immediately, is expected to return $140,000 five years from now. If Flaherty demands a 9% return, how much is she willing to pay for this investment?

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  1. 28 October, 05:24
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    The answer is 90990.394

    Explanation:

    To know how much is she willing to pay, we need to insert values into the future value formula and solve it for present value.

    The data from this problem is:

    i = 0.09

    n = 5

    F = 140000

    The future value formula is:

    F = P (1+i) ^n where;

    (1+i) ^n reads as 1 + i to the power n

    Substituting values and solving for p, we get p = 90990.394
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