What cash flow must the investment provide at the end

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Reference no: EM13275148

MAE Bank is negotiating to make a 7-year loan of $25,000 to Madanique Corporation (MC). To repay the bank, MC will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of Years 4 through 7. MC is essentially riskless, so the MAE bank is confident the payments will be made, and they consider 8% as an appropriate rate of return on low risk 7-year loans. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X? (can you show me the math of how to get the right answer) Can you put the above scenario in the context of a real world example?

Reference no: EM13275148

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