Question

Assuming that money is worth 10%, compute the present value of:

a. $15,000 received 15 years from today.
b. The right to inherit $4,250,000 14 years from now.
c. The right to receive $11,000 at the end of each of the next six years.
d. The obligation to pay $10,000 at the end of each of the next 10 years.
e. The right to receive $9,000 at the end of the 7th, 8th, 9th, and 10th years from today.

Answer 1

a. ($3,590)

b. ($1,119,158)

c. ($47,908)

d. ($61,446)

e. $17,714

Step-by-step explanation:

We use the Time Value of Money to compute the Present Value. Present Value is the Worth in Today`s Money of the Cash Flow Streams expected or to be received in the future.

Calculation of the Present Value for each case is shown below :

a.

FV = $15,000

N = 15

P/YR = 1

PMT = $0

I = 10 %

PV = ?

Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($3,590)

b.

FV = $4,250,000

N = 14

P/YR = 1

PMT = $0

I = 10 %

PV = ?

Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($1,119,158)

c.

FV = $ 0

N = 6

P/YR = 1

PMT = $11,000

I = 10 %

PV = ?

Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($47,908)

d.

FV = $ 0

N = 10

P/YR = 1

PMT = - $10,000

I = 10 %

PV = ?

Using a Financial Calculator to Inpute the Values as above, the Present Value will be ($61,446)

e.

$ 0 CFj

$ 0 CFj

$ 0 CFj

$ 0 CFj

$ 0 CFj

$ 0 CFj

$9,000 CFj

$9,000 CFj

$9,000 CFj

$9,000 CFj

Shift NPV $17,714

This part of the question has uneven Cash Flows, so i used the CFj Function on the Financial to calculate the Net Present Value (NPV)