Indigo Company is considering an investment which will return a lump sum of $2,610,000 six years from now. What amount should Indigo Company pay for this investment to earn an 11% return

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22-04-2022
Business

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Indigo Company is considering an investment which will return a lump sum of $2,610,000 six years from now. What amount should Indigo Company pay for this investment to earn an 11% return

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divyamadaan8054 divyamadaan8054 · Answer 1 · 2022-05-04T20:20:59+02:00

The amount should Indigo Company pay for this investment to earn an 11% return is $1,395,410.

What do you mean by Present value?

The term present value is considered as the current value of a future sum of money regarding the cash flows that are given in a specified period of time.

Solution:

Given Information:

Amount received= $2,610,000
Time period=6
Return=11%

Amount Invested= Amount received*Present value factor pf $1 (11%, 6 years)

Amount Invested=$2,610,000*0.53464

Amount Invested=$1,395,410

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