You have just received a windfall from an investment you made in a friend's business. She...
You have just received a windfall from an investment you made in a friend's business. She will be paying you $23,629 at the end of this year, $47,258 at the end of next year, and $70,887 at the end of the year after that (three years from today). The interest rate is 8.3%per year.
a. What is the present value of your windfall?
b. What is the future value of your windfall in three years (on the date of the last payment)?
Homework Answers
Cash Flows:
Year 1 = $23,629
Year 2 = $47,258
Year 3 = $70,887
Interest Rate = 8.30%
Present Value = $23,629/1.083 + $47,258/1.083^2 +
$70,887/1.083^3
Present Value = $21,818.10 + $40,291.96 + $55,806.04
Present Value = $117,916.10
Future Value = $23,629*1.083^2 + $47,258*1.083 + $70,887
Future Value = $27,714.19 + $51,180.41 + $70,887.00
Future Value = $149,781.60
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