Homework Answers
| Year | cash flow = previous year*(1+growth rate) | cash flow/(1+r)^n r =8% |
| 1 | 3660 | 3388.8889 |
| 2 | 3806.4 | 3263.3745 |
| 3 | 3958.656 | 3142.5088 |
| 4 | 4117.0022 | 3026.1196 |
| 5 | 4281.6823 | 2914.041 |
| 6 | 4452.9496 | 2806.1136 |
| 7 | 4631.0676 | 2702.1835 |
| 8 | 4816.3103 | 2602.1026 |
| 9 | 5008.9627 | 2505.7284 |
| 10 | 5209.3212 | 2412.9237 |
| 11 | 5417.6941 | 2323.5561 |
| 12 | 5634.4018 | 2237.4985 |
| 13 | 5859.7779 | 2154.6282 |
| 14 | 6094.169 | 2074.8271 |
| 15 | 6337.9358 | 1997.9817 |
| 16 | 6591.4532 | 1923.9824 |
| 17 | 6855.1114 | 1852.7238 |
| 18 | 7129.3158 | 1784.1044 |
| 19 | 7414.4884 | 1718.0264 |
| 20 | 7711.068 | 1654.3958 |
| 21 | 8019.5107 | 1593.1219 |
| 22 | 8340.2911 | 1534.1174 |
| 23 | 8673.9028 | 1477.2982 |
| 24 | 9020.8589 | 1422.5835 |
| 25 | 9381.6932 | 1369.8952 |
| present value of promise | sum of present value of future cash flow | 55882.73 |
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A nch aunt has promised you $3.660.00, one year from today. In addition, each year after...
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A rich aunt has promised you $6,000 one year from today. In addition, each year after that, she has promised you a payment (on the anniversary of the last payment) that is 3% larger than the last payment. She will continue to show this generosity for 20 years, g ng a total of 20 payments if the interest rate is 7%, what is her promise worth today? The present value of the aunt's promise is $(Round to the nearest dollar.)
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