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Baker Brothers is looking at an investment that will pay Baker Brothers $4,000 in year 1, $5,000 in year 2, and $7,500 in year 3.
Baker Brothers is looking at an investment that will pay Baker Brothers $4,000 in year 1, $5,000 in year 2, and $7,500 in year 3. How much should the company pay for this cash stream today, in order to earn a rate of return of 6.00%? 0 Investment in time period 0: $4,000 $5,000 $7,500 2 3 8% 1 PRESENT VALUE OF $1.00 Periods 4% 5% .9615 .9524 .9246 .9070 3 .8890 .8638 .8548 .8227 .8219 .7835 AWN 6% .9434 .8900 .8396 .7921 .7473 .9259 .8573 .7938 .7350 .6806 10% .9091 .8264 .7513 .6830 .6209 12% .8929 .7972 .7118 .6355 .5674 PRESENT VALUE OF A SERIES OF $1.00 CASH FLOWS 4% 5% 6% 8% 10% 12% .9615 .9259 9091 8929 1.8861 1.8594 1.8334 1.7833 1.7355 1.6901 2.7751 2.7232 2.6730 2.5771 2.4869 2.4018 3.6299 3.5460 3.4651 3.3121 3.1699 3.0373 4.4518 4.3295 4.2124 3.9927 3.7908 3.6048
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