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 $549,000 today, plus $549,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 8 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.)

Explanation / Answer

Present Value = 549000 + 549000/(1+.08)^1 + 549000/(1+.08)^2 + 549000/(1+.08)^3 + 549000/(1+.08)^4 + 549000/(1+.08)^5 + 549000/(1+.08)^6 = 3086960.936 or 3086961

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