spazzinchicago
spazzinchicago
25.04.2020 • 
Mathematics

You are negotiating to make a 7-year loan of $25,000 to Breck Inc. To repay you, Breck will pay $2,500
at the end of Year 1, $5,000 at the end of Year 2, and $7,500 at the end of Year 3, plus a fixed but
currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is
essentially riskless, so you are confident the payments will be made. You regard 8% as an appropriate
rate of return on a low risk but illiquid 7-year loan. What cash flow must the investment provide at the
end of each of the final 4 years, that is, what is X?

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