Answer to Question #137783 in Finance for John Chulu

Question

You are looking into an investment that will pay you ZMW 12, 000 per year for the next 10 years. If you require a 15 percent at a return, what is the most you would pay for this investment?

Answer 1

$$Solution$$

$PVIAF=\frac{1-(1+r)^{-n}}{r}\\ Where, PVIAF\ is\ the\ Present\ Value\ Interest\ Annuity\ Factor.\\ r=15\%, \ n=10\\ Therefore,\\ PVIAF=\frac{1-(1+0.15)^{-10}}{0.15}\\ =5.02\\ But, Present\ Value=PVIAF\times\ Future\ Value\\ PV=5.02\times12,000\\ =ZMW\ 60,240$