Answer:
The maximium cost I would be willing to purchase the asset is 26.033,84 above this price the investment will not yield the 6% return.
Explanation:
We calcualte the present value of all cash flows:
annual cashflow:
15,000 revenue - 2,000 expenses = 3,000
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 3,000.00
time 20
rate 0.06
[tex]3000 \times \frac{1-(1+0.06)^{-20} }{0.06} = PV\\[/tex]
PV $34,409.7637
Pv of the 10th year investment:
[tex]\frac{Maturity}{(1 + rate)^{time} } = PV[/tex]
Maturity $15,000.0000
time 10.00
rate 0.06000
[tex]\frac{15000}{(1 + 0.06)^{10} } = PV[/tex]
PV 8,375.9217
present value of the cashflow
34,409.7637 - 8,375.92 = 26.033,84
