An investment offers $5,900 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e. g., 32.16))

Today, the investment is worth $31,997.29

Explanation:

Giving the following information:

An investment offers $5,900 per year for 15 years, with the first payment occurring one year from now. The required return is 6 percent

First, we need to calculate the final value, using the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual pay = 5,900

n = 15

i = 0.06

FV = {5,900*[ (1.06^15) - 1]} / 0.06 = $137,328.22

Now, we can determine the present value:

PV = FV / (1+i) ^n

PV = 137,328.22 / 1.06^25 = $31,997.29