Answer:
It will take 14 years.
Explanation:
Imagine you are Julie at year cero about to purchase eleven acres of land. The seller tells you that in X amount of years it will value $34686 because it increases 5% each year. He also tells you that according to the Present Value formula, the eleven acres are worth today $15890.
The formula is:
PV=Ct/[(1+r)^n]
Ct= cash flow at t time
r= rate
n= period of time
To calculate how many years it will be worth $34686 you need to isolate n from the PV formula
n=[ln(Ct/PV)]/ln(1+r)
n=ln(34686/15890)/ln(1+0,05)
n=16
Giving the following information, we need to calculate how many years will take to the investment to duplicate:
I= $1000
I=5%
To calculate we are going to use the Present value formula:
PV=Ct/[(1+r)^n]
Ct= cash flow at t time
r= rate
n= period of time
To calculate how many years it will take to duplicate we need to isolate n from the PV formula
n=[ln(Ct/PV)]/ln(1+r)
n=ln(2000/1000)/ln(1+0,05)
n=14
