You wrote a piece of software that does a better job of allowing computers to ne

Question

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $511,000 today, plus $511,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company is offering you?

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $511,000 today, plus $511,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 6 percent, what is the present value of the cash flow stream that the company is offering you?

Explanation / Answer

present value of the cash flow stream = 511,000 + 511,000/1.06 + 511,000/1.06^2 + 511,000/1.06^3+ 511,000/1.06^4 + 511,000/1.06^5 + 511,000/1.06^6 =$3,023,752.73

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