An investment offers $8,500 per year for 15 years, with the first payment occurr

Question

An investment offers $8,500 per year for 15 years, with the first payment occurring 1 year from now. Assume the required return is 9 percent.

Requirement 1:
What is the value of the investment? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Value of the investment $

Requirement 2:
What would the value be if the payments occurred for 40 years? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Value of the investment $

Requirement 3:
What would the value be if the payments occurred for 75 years? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Value of the investment $

Requirement 4:
What would the value be if the payments occurred forever? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Value of the investment $



Please show calculator functions for this.

Explanation / Answer

Using financial calculator:

input PMT = 8500
input i = 9%

Requirement 1:
input n = 15
calculate PV = 68,515.85

Requirement 2:
input n = 40
calculate PV = 91,437.56

Requirement 3:
input n = 75
calculate PV = 94,297.15

Requirement 4:
input n = forever
In this case the PV is calculated as PMT/i = 8500/9% = 94,444.44

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