An investment offers $7,100 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 45 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 70 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred forever

Question

Kaydence Anderson

Business

15 March, 19:16

An investment offers $7,100 per year for 20 years, with the first payment occurring one year from now. If the required return is 7 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 45 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred for 70 years? (Do not round intermediate calculations and round your final answer to 2 decimal places, e. g., 32.16.) Present value $ What would the value be if the payments occurred forever

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Answers (1)

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Acevedo · Answer 1

Instructions are listed below.

Explanation:

Giving the following information:

An investment offers $7,100 per year for 20 years, with the first payment occurring one year from now.

A) i = 0.07

First, we need to calculate the final value:

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit

FV = {7,100*[ (1.07^20) - 1]}/0.07 = 291,068

PV = FV / (1+i) ^n

PV = 291,068/1.07^20 = 75,217.50

B) n=45

FV = {7,100*[ (1.07^45) - 1]}/0.07 = 2,028,820.11

PV = 2,028,820.11/1.07^45 = $96,599.20

C) n=70

FV = {7,100*[ (1.07^70) - 1]}/0.07 = 11,460,352.64

PV = 11,460,352.64/1.07^70 = 100,538.76