What is the present value of a $100,000 cash flow to be received at the end...
What is the present value of a $100,000 cash flow to be received at the end of each of the next 15 years from an account that earns an annual rate of 10%?
1,500,000
760,608
523,450
976,455
Homework Answers
Annual Cash Flows P = $100000
Interest Rate = r = 10%
Number of periods = n = 15
This is case of ordinary Annuity (since the payments are made at end of each year)
Hence, NPV = P/(1+r) + P/(1+r)2 +.... P/(1+r)15
=> NPV = P [1 - (1+r)-n]/r = 100000 (1 - 1.10-15)/0.10 = $760607.95
Hence the correct option is (b) $760,608
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