Your friend is looking for investors in a risky business venture. To convince you to participate, she is offering you a 17% rate of return in your investment. How much should you be willing to invest your friend s company, if she believes that she will be able to pay you the following amounts: $1000 at the end of the first year, $4000 at the end of the second year, and $5000 at the end of years 3, 4, and 5.

The answer is $11,847

Explanation:

Amount to be invested is equal to the present value of future inflows

Present value = future value / (1+Interest rate) ^Number of years

Hence, amount to be invested = 1000 / (1.17) + 4000 / (1.17) ^2 + 5000 / (1.17) ^3 + 5000 / (1.17) ^4 + 5000 / (1.17) ^5

= $11,847.

Hence, the answer is $11,847 ...

B - $13,556.82

Explanation:

Amount to be invested is equal to the present value of future inflows

Present value = future value / (1+Interest rate) ^Number of years

The actual amount at the end of the first year should be $3000 if there is an answer in the options

The amount at the end of the second year is $4000

The amount at the end of the third, fourth and fifth year is $5000

Hence, amount to be invested = 3000 / (1.17) + 4000 / (1.17) ^2 + 5000 / (1.17) ^3 + 5000 / (1.17) ^4 + 5000 / (1.17) ^5

= $13,556.82

Hence, the answer is $13,556.82