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Investment Appraisal Doubt

This topic has 1 reply, 2 voices, and was last updated 11 months ago by John Moffat.

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February 21, 2022 at 9:23 am #649042
asmaruzny@gmail.com
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Section B of the Kaplan Kit
Dong is assessing a project in which the first of four annual lease payments has been agreed at $120000.This is payable in one year’s time and subsequent payments will rise by 4% per annum.Dong’s proper money cost of capital is 8%.
What is the present value of Dong’s last payment that will be made in four years’ time(to the nearest $000)?
(Can I have the answer with the workings please?)
February 21, 2022 at 9:47 am #649052
John Moffat
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I don’t understand why you are asking me for the answer given that the Kaplan Kit contains answers!!
The payment in 4 years time will be 120,000 x 1.04^3.
This is then discounted for 4 years time at 8% in the normal way.
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