What is the value today of $4,500 per year, at a discount rate of 8 percent, if
ID: 2631181 • Letter: W
Question
What is the value today of $4,500 per year, at a discount rate of 8 percent, if the first payment is received 7 years from today and the last payment is received 25 years from today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
What is the value today of $4,500 per year, at a discount rate of 8 percent, if the first payment is received 7 years from today and the last payment is received 25 years from today? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
Present value of the cash flows at (t = 6) = 4500*PVIFA(8%,19)
= 4500*9.6036
= $43216.20
..
Present value of the above at (t = 0) = Present value of the cash flows at (t = 6)/(1.08^6)
= 43216.20/(1.08^6)
= $27233.54 ..(Ans)
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