C.$12,517,469.
present value factor = 1 /(1+r)^n
here,
r=7.5%
=>0.075.
n=1,2,3,4.
year | cash flow | present value factor | cash flow * present value factor |
1 | 1,200,000 | 1/(1.075)^1=>0.93023256 | (1,200,000*0.93023256)=>1,116,279.07 |
2 | 3,500,000 | 1/(1.075)^2=>0.86533261 | (3500000*0.86533261)=>3,028,664.14 |
3 | 5,750,000 | 1/(1.075)^3=>0.80496057 | (5,750,000*0.80496057)=>4,628,523.28 |
4 | 5,000,000 | 1/(1.075)^4=>0.74880053 | (5,000,000*0.74880053)=>3,744,002.65 |
present value of cash flows | $12,517,469 |
second part;
Uneven cash flows | Annuity payments | |
monthly apartment rent | yes | |
matching contribution of each employee towards retirement | yes | |
promise to pay 10% of profits | yes | |
commitment to contribute $600 in a fixed interest bearing account | yes |
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