Question
. You are negotiating to make a 7-year loan of $25,000 to Super Shakes Inc. To repay you, Shakes will pay $2,500 at the end
. You are negotiating to make a 7-year loan of $25,000 to Super Shakes Inc. To repay you, Shakes will pay $2,500 at the end of Year 1, $6,000 at the end of Year 2, and $7,198 at the end of Year 3, plus a fixed but currently unspecified equal cash flow, X, at the end of Years 4 through 7. Shakes is essentially riskless, so you are confident the payments will be made, and you regard 8% as an appropriate rate of return on low risk 7-year loans. What cash flow must Super Shakes provide at the end of each of the final four years, that is, what is X?
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