Answered

Westonci.ca is the premier destination for reliable answers to your questions, brought to you by a community of experts. Discover detailed solutions to your questions from a wide network of experts on our comprehensive Q&A platform. Our platform offers a seamless experience for finding reliable answers from a network of knowledgeable professionals.

Marko, Inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,700, $10,700, and $16,900 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 11 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?
a. $35,797.50
b. $33,300.00
c. $24,457.63
d. $26,176.63
e. $27,560.91

Sagot :

facundobuzzetti

Answer:

Total PV= $26,176.63

Explanation:

Giving the following information:

Cash flow:

Cf1= $5,700

Cf2= $10,700

Cf3= $16,900

To calculate the price of the investment now, we need to use the following formula on each cash flow:

PV= Cf / (1+i)^n

PV1= 5,700/1.11= 5,135.14

PV2= 10,700/1.11^2= 8,684.36

PV3= 16,900/1.11^3= 12,357.13

Total PV= $26,176.63

We hope you found this helpful. Feel free to come back anytime for more accurate answers and updated information. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We're glad you chose Westonci.ca. Revisit us for updated answers from our knowledgeable team.