You are negotiating to make a 7-year loan of $37,500 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and$7,500 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is essentially riskless,you are confident the payments will be made. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must theinvestment provide at the end of each of the final 4 years, that is, what is X?a. $9,012.95b. $8,348.84C. $9,202.70d. $7,684.73e. $9,487.32

The cashflow as per the question is given as Year 0 1 2 3 4 6 7 Cashflow 37500 2500 5000 7500…

Fou are negotiating to make a 7-year loan of $37.500 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7.500 at the end of Year 3. plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is essentially riskless, : rou are confident the payments will be made. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the nvestment provide at the end of each of the final 4 years, that is, what is X? O a. $9,012.95 O b. $8,348.84 O c. $9,202.70 O d. S7,684.73 O e. $9,487.32

Fou are negotiating to make a 7-year loan of $37.500 to Breck Inc. To repay you, Breck will pay $2,500 at the end of Year 1, $5,000 at the end of Year 2, and $7.500 at the end of Year 3. plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is essentially riskless, : rou are confident the payments will be made. You regard 8% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the nvestment provide at the end of each of the final 4 years, that is, what is X? O a. $9,012.95 O b. $8,348.84 O c. $9,202.70 O d. S7,684.73 O e. $9,487.32

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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