CF required to provide a given rate of return
5. You have been offered a
5-year investment at a price of $75,000. It will pay $8,000 at the end of Year 1, $12,000 at the end of Year 2, and a fixed but currently unspecified cash flow, X, at the end of Years 3 through 5. The payer is essentially riskless, so you are sure the payments will be made, and you regard 3.5% as an appropriate rate of return on riskless 5-year investments. What cash flow must the investment provide at the end of each of the final 3 years, that is, what is X?