Del Monty will receive the following payments at the end of the next three years: $15,000, $18,000, and $20,000. Then from the end of the 4th year through the end of the 10th year, he will receive an annuity of $21,000 per year.
At a discount rate of 16 percent, what is the present value of all three future benefits? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Present value of all future benefits = $____
Answer:
Cash flow in year 1 CF1=15000
Cash flow in year 2 CF2=18000
Cash flow in year 3 CF3=20000
Cash flow in year 4 through 10th C=21000
Discount rate r=16%
Present value P=CF1/(1+r) + CF2/(1+r)^2 + CF3/(1+r)^3 + C*(1-(1+r)^-7)/(r*(1+r)^3)
P=15000/(1+16%) + 18000/(1+18%)^2 +20000/(1+18%)^3 + 21000*(1-(1+16%)^-7)/(16%*(1+16%)^3)
P= $93455.22
Del Monty will receive the following payments at the end of the next three years: $15,000,...
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