You are considering making an investment which requires you to pay $1,094 today. In return you expect
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Question:
You are considering making an investment which requires you to pay $1,094 today. In return you expect to receive $489 in 3 years, $612 in 12 years, and an annuity stream which begins in 14 years, and then continues forever. The first payment in the annuity stream is expected to be $308, and all subsequent annual annuity payments are expected to grow at an annual rate of 5.1%.
Compute the fair NPV of the investment using an expected return, E(r), of 9.7% per year.
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