What is its net present value

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Consider an investment that will pay you $1,000 each year for five years. After that, the payment will grow by 3 percent per year indefinitely, so that the payment in year 6 will be $1,030, the payment in year 7 will be $1,060.90, and so forth.

a) If your required rate of return on this investment is 13 percent, what is the most you'd be willing to pay for it?

b) If the investment costs you $8,000 today, what is its net present value?

Reference no: EM132398454

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