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You started a business plan and your income is as follows: Year 1: $40 Year 2:...

You started a business plan and your income is as follows:

  • Year 1: $40
  • Year 2: $80
  • Year 3: $120

What would be equivalent “4” year annuity? 10% rate

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Answer #1

here , I have first calculated the present values of individual cash flows using the interest rate of 10%

and total present value of the 3 year cash flows is calculated by summing the individual present values

to calculate annuity equivalent , present value interest rate factor of annuity (PVIFA) is calculated

cash flow present value interest rate 1 year 4036.36363636 80 66.11570248 120 90.15777611 4 6 present value 192.6371 present

cash flow 40 80 year present value interest rate 0.1 B2/((1+SES1)AA2) B3/(( 1+$E$1)^A3) B4/(1+SE$1)AA4) 3 2 6 present value -C2+C3+C4 present value interest rate factor of annuity 7 (PVIFA) 8 period of annuity (((1+E1)AB8)-1)/(1+E1)AB8)*E1) 4 10 annuity equivalent B6/B7 12

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