Question #137783

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?

Expert's answer

"PVIAF=\\frac{1-(1+r)^{-n}}{r}\\\\ \nWhere, PVIAF\\ is\\ the\\ Present\\ Value\\ Interest\\ Annuity\\ Factor.\\\\\nr=15\\%, \\ n=10\\\\\nTherefore,\\\\\nPVIAF=\\frac{1-(1+0.15)^{-10}}{0.15}\\\\\n=5.02\\\\\nBut, Present\\ Value=PVIAF\\times\\ Future\\ Value\\\\\nPV=5.02\\times12,000\\\\\n=ZMW\\ 60,240"

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