An investment offers $4,000 per year for 14 years, with the first payment occurr

Question

An investment offers $4,000 per year for 14 years, with the first payment occurring one year from now. If the required return is 12 percent, the present value of the investment is $. If the payments occurred for 33 years, the present value of the investment would be $. If the payments occurred for 79 years, the present value of the investment would be $. If the payments last forever, the present value would be $(Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

For 14 years

If the required return is 12 percent, the present value of the investment is = 4000/1.12 + 4000/1.12^2 + 4000/1.12^3 ............4000/1.12^14 = $26512.67

If the payments occurred for 33 years, the present value of the investment would be = 4000/1.12 + 4000/1.12^2 + 4000/1.12^3 ............4000/1.12^33 = $32541.41

If the payments occurred for 79 years, the present value of the investment would be =4000/1.12 + 4000/1.12^2 + 4000/1.12^3 ............4000/1.12^79 =$33329.02

If the payments last forever, the present value would be = 4000/12% =$33333.33

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