Homework Answers
Present Value at 65 years = Future Value of Annuity = P*[{(1+i)^n}-1]/i
where, P = Annuity, i = Interest Rate = 0.07, n = Number of Periods = 40, Future Value = 1366187
Therefore,
1366187 = P*[{(1+0.07)^40}-1]/0.07
1366187*0.07 = P*[13.974458]
Discounted Cash Flow = P = 95633.09/13.974458 = $6843.42
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