Question

Back to Assignment $102,576.50 $108,896.86 Attempts: 0 Keep the Highest: 0/2 $113,252.73 1. Working with Numbers and Graphs Q1 $103,448.28 The present value of $30,000 each year for 4 years at a 4% interest rate is approximately The present value of $110,000 each year for 10 years at a 7.5% interest rate is approximately

Answer 1

(1)

Cash flow = $30,000 each year.

Interest rate = 4% = 0.04

Number of years = 4

Present value =[ $30000 / (1+0.04)¹ ] + [$30000 / (1+0.04)² ]+ [$30000 / (1+0.04)³ ]+ [$30000 / (1+0.04)⁴]

Present Value = $28846.15 + $27736.69 + $26669.89 + $25644.13

Present Value = $108896.86

The present value of $30000 each year for 4 years at a 4% interest rate is approximately $108896.86

(2)

Cash flow = $110,000 each year.

Interest rate = 7.5% = 0.075

Number of years = 10

Present value =[ $110000 / (1+0.075)¹ ] + [$110000 / (1+0.075)² ]+ [$110000 / (1+0.075)³ ]+ [$110000 / (1+0.075)⁴] + [$110000/(1+0.075)⁵] + [$110000/(1+0.075)⁶] + [$110000/(1+0.075)⁷] + [$110000/(1+0.075)⁸] + [$110000/(1+0.075)⁹] + [$110000/(1+0.075)¹⁰]

Present Value = $102325.58 + $95186.59 + $88545.66 + $82368.06 + $76621.45 + $71275.77 + $66303.04 + $61677.25 + $57374.18 + $53371.33

Present Value = $755048.91

The present value of $110000 each year for 10 years at 7.5% interest rate is approximately $755048.91