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Answer appropriately please?? a) Cash inflows of $1787 will occur at the end of each year from years 1 to 5. Cash inflow of $6000
Answer appropriately please?? a) Cash inflows of $1787 will occur at the end of each year from years 1 to 5. Cash inflow of $6000 will occur at the end of year 5.
Required rate of return = current earning rate on savings = 7%
b) Maximum price would be the present value of the above cash flows.
Maximum price = $1787 x PVIFA (7%, 5) + $6000 x PVIF (7%, 5) = $1787 x 4.10019743589 + $6000 x 0.71298617946 = $11,604.97
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