What is the present value of the investment

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A business owner is considering making an investment which will return the following cash flow at the end of each year: What is the present value of the investment (i.e., how much could they afford to pay for the investment) assuming a 10% interest (discount) rate? Year Cash Return 1 $ 1,000 2 $ 5,000 3 $10,000 1b. Subtract your answer in 1a from $16,000 (the total amount received over 3 years). The difference of $ _________ is the size of the discount (i.e., the cost of time) when interest rates are 10%. 1c. True or False? The higher the interest (discount) rate, the lower the present value of returns that are being received in the future. 1d. True or False? The higher the interest rate, the greater the discount penalty on returns that are being received in the future.

Reference no: EM13763898

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