Problem 6-47 Present Value and Multiple Cash Flows [LO1] What is the value today
ID: 2739727 • Letter: P
Question
Problem 6-47 Present Value and Multiple Cash Flows [LO1]
What is the value today of $3,000 per year, at a discount rate of 8 percent, if the first payment is received 7 years from today and the last payment is received 25 years from today? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
What is the value today of $3,000 per year, at a discount rate of 8 percent, if the first payment is received 7 years from today and the last payment is received 25 years from today? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
value today is $18,155.69
calculate present value
year cash flows pv factor @8% present value 0 1 1 0 0.925925926 0 2 0 0.85733882 0 3 0 0.793832241 0 4 0 0.735029853 0 5 0 0.680583197 0 6 0 0.630169627 0 7 3000 0.583490395 1750.471186 8 3000 0.540268885 1620.806654 9 3000 0.500248967 1500.746901 10 3000 0.463193488 1389.580464 11 3000 0.428882859 1286.648578 12 3000 0.397113759 1191.341276 13 3000 0.367697925 1103.093774 14 3000 0.340461041 1021.383124 15 3000 0.315241705 945.7251149 16 3000 0.291890468 875.6714027 17 3000 0.270268951 810.8068543 18 3000 0.250249029 750.7470873 19 3000 0.231712064 695.136192 20 3000 0.214548207 643.6446222 21 3000 0.198655748 595.9672428 22 3000 0.183940507 551.8215211 23 3000 0.170315284 510.9458529 24 3000 0.157699337 473.0980119 25 3000 0.146017905 438.0537147 18155.68957