Answer:
year 3 cashflow: 23,212
Explanation:
economic equivalent value of the investment: This means the investment will have a return of 5%. Si we must calculate which cahs flow makes the NPV equal to zero.
[tex]50,000 = \frac{10,000}{1.05}+\frac{15,000}{(1.05)^{2}} +\frac{x}{(1.05)^{3}}[/tex]
We should solve for "x"
[tex]50,000 - \frac{10,000}{1.05}-\frac{15,000}{(1.05)^{2}} =\frac{x}{(1.05)^{3}}[/tex]
[tex]26,871 =\frac{x}{0.863837599}[/tex]
[tex]26,871\times0.863837599 =x[/tex]
x = 23,211.96268 = 23,212
The third cashflow will need to be of 23,212 to make the investment equivalent at 50,000 at 5% discount rate.
