You are offered a court settlement in the following terms: you will receive 5 equal payments...

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You are offered a court settlement in the following terms: you will receive 5 equal payments of $2,717 each every year, with

business finance

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Answer 1

Answer #1

Let Cash Flows in Year n be denoted by CFn
Given,
CF3 = 2717
CF4 = 2717
CF5 = 2717
CF6 = 2717
CF7 = 2717
Interest Rate = r = 0.07
Net Present Value = PV = ΣCFn/(1+r)ⁿ
= 2717/(1+0.07)³ + 2717/(1+0.07)⁴ + 2717/(1+0.07)⁵ + 2717/(1+0.07)⁶ + 2717/(1+0.07)⁷

= $9,730.31

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Answer 2

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