Black Company will receive $30,000 at the end of each year for
the next 8 years. Black has an annual cost of capital equal to 10
percent per year.
Using a spreadsheet or a financial calculator, calculate the
present value of the cash receipts.
What is the present value of these cash receipts?
Answer
Year |
Cash Inflows |
Present value factor at 18% |
Present Value of inflow |
[A] |
[B = 1/1.10Year] |
[C = A x B] |
|
1 |
$30,000 |
0.909090909 |
$27,273 |
2 |
$30,000 |
0.826446281 |
$24,793 |
3 |
$30,000 |
0.751314801 |
$22,539 |
4 |
$30,000 |
0.683013455 |
$20,490 |
5 |
$30,000 |
0.620921323 |
$18,628 |
6 |
$30,000 |
0.56447393 |
$16,934 |
7 |
$30,000 |
0.513158118 |
$15,395 |
8 |
$30,000 |
0.46650738 |
$13,995 |
Total Present value of Cash receipts |
$160,048 ANSWER |
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