Answer:
The special return will be for 23,330.11 at year 3
Explanation:
we know that the expected return AKA internal rate of return is 12.30 per year
we set up the time-line for the investment:
F0 -56,000 investment
constant return of 12,000 for 5 years.
additional return at F3
F0 + PV of the F3 return + PV of the 12,000 annuity = 0
present value of the annuity:
[tex]C \times \frac{1-(1+r)^{-time} }{rate} = PV\\[/tex]
C 12,000.00
time 5
rate 0.123
[tex]12000 \times \frac{1-(1+0.123)^{-5} }{0.123} = PV\\[/tex]
PV $42,937.7486
Present value of the additional return:
56,000 - 42,937.75 = 13,062.25
Now, we know that this is the discounted amount of the nominal return at 12.30% during 3 years:
[tex]\frac{Nominal}{(1 + rate)^{time} } = PV[/tex]
[tex]\frac{Nominal}{(1 + 0.1230)^{5} } = 13,062.25[/tex]
Nominal = 23,330.11
