given a 7 percent interest rate, compute the present calue of payments made in years 1,2,3...

Question

Question

given a 7 percent interest rate, compute the present calue of payments made in years 1,2,3 and 4 of $1800, $2000, $2000 and $2300

Answer 1

Answer #1

Calculate present value as follows:

Present value = Cash flow/(1+ rate)^period

Present value = 1800/(1+7%)^1 + 2000/(1+7%)^2 + 2000/(1+7%)^3 + 2300/(1+7%)^4

Present value = 1682.243 + 1746.877 + 1632.596 + 1754.659

Present value = 6816.38

Answer 2

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