3. You are offered an investment with the following conditions: n The cost of the investment is...
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3. You are offered an investment with the following conditions:
n The cost of the investment is 1,000.
n The investment pays out a sum X at the end of the first year; this payout grows at the rate of 10 percent per year for 11 years.
If your discount rate is 15 percent, calculate the smallest X that would entice you to purchase the asset. For example, as you can see in the following display, X = $100 is too small—the NPV is negative.
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