An asset is projected to generate 14 annual cash flows of $6,000 starting 5 years from...
An asset is projected to generate 14 annual cash flows of $6,000 starting 5 years from today. If the discount rate is 10%, how much is this asset worth today? Round to the nearest cent. [Hint: This is a deferred annuity. Remember the rule about where on the timeline PV annuity goes when you have a deferred annuity.]
Homework Answers
Present value=Cash flows*Present value of discounting factor(rate%,time period)
=6000/1.1^5+6000/1.1^6+................+6000/1.1^18
=6000[1/1.1^5+1/1.1^6+..............+1/1.1^18]
=6000*5.031546655
=$30189.28(Approx).
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