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You have been offered a project paying​ $300 at the beginning of each year for the next 20 years. What is the maximum amount of money you would invest in this project if you expect 9 percent rate of return to your​ investment?

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facundobuzzetti

Answer:

The project is worth $2,738.57.

Explanation:

Giving the following information:

You have been offered a project paying​ $300 at the beginning of each year for the next 20 years. The rate of return is 9%.

To calculate the present value, first, we need to calculate the final value:

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

A= annual pay= 300

n= 20

i= 0.09

FV= {300*[(1.09^20)-1]}/0.09

FV= $15,348.06

Now, we can calculate the present value:

PV= FV/(1+i)^n

PV= 15,348.06/1.09^20= $2,738.57

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