Consider the following investment plans. Plan1: will pay zero for the first 4 years, but then
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Question:
Consider the following investment plans.
• Plan1: will pay zero for the first 4 years, but then it will pay $52,000 per year for the next 3 years.
• Plan 2: will pay $38,000 per year for the first 3 years and $25,000 in the 4th year.
All payments are made at year-end.
Consider the rate of return on these investments is 5% annually.
How much an investor is willing to pay today for each of these 2 above plans?
For each plan, how much a person should set aside now (today) to cover these payments?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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