You are negotiating to make a 7-year loan of $30,000 to Breck Inc. To repay you, Breck
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You are negotiating to make a 7-year loan of $30,000 to Breck Inc. To repay you, Breck will pay $2,000 at the end of Year 1, $5,000 at the end of Year 2, and $7,000 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is essentially riskless, so you are confident the payments will be made. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X?
a. $4,271.67
b. $4,496.49
c. $4,733.15
d. $5,218.30
e. $4,969.81
Related Book For
Financial Management Principles and Applications
ISBN: 978-0134417219
13th edition
Authors: Sheridan Titman, Arthur J. Keown, John H. Martin
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