Question

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?

Answer 1

Answer:

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