Present Value (PV) of Cash Flow: | |||||||
(Cash Flow)/((1+i)^N) | |||||||
Annual Interest rate=15% | |||||||
Quarterly interest rate=i | |||||||
(1+i)^4=1.15 | |||||||
1+i=1.15^(1/4)= | 1.035558 | ||||||
i=0.035558 | |||||||
N=Quarter of Cash Flow | |||||||
N | A | B=A/(1.03558^N) | |||||
Quarter | Cash Flow | Present Value | |||||
A | 1 | $50 | $48.28 | ||||
B=A*1.02 | 2 | $51.00 | $47.56 | ||||
C=B*1.02 | 3 | $52.02 | $46.84 | ||||
D=C*1.02 | 4 | $53.06 | $46.14 | ||||
E=D*1.02 | 5 | $54.12 | $45.45 | ||||
F=E*1.02 | 6 | $55.20 | $44.76 | ||||
G=F*1.02 | 7 | $56.31 | $44.09 | ||||
H=G*1.02 | 8 | $57.43 | $43.43 | ||||
I=H*1.02 | 9 | $58.58 | $42.78 | ||||
J=I*1.02 | 10 | $59.75 | $42.13 | ||||
K=J*1.02 | 11 | $60.95 | $41.50 | ||||
L=K*1.02 | 12 | $62.17 | $40.88 | $533.84 | SUM | ||
M=L*1.01 | 13 | $62.79 | (62.17*1.01) | ||||
Value of income stream from quarter 13 to perpetuity at end of year 3 | $2,456.78 | (62.79/(0.035558-0.01) | |||||
Value of income stream from quarter 13 to perpetuity at PRESENT | $1,615.37 | 2456.78/(1.15^3) | |||||
PRESENT VALUE OF TOTAL INCOME STREAM | $2,149.21 | (533.84+1615.37) | |||||
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