Question

Today is January 1, 2020. On January 1 of the years 2021 through 2030, you are to receive $50,000. If cash flows are discounted at 10% per year, the present value of these cash flows (as of today), rounded to the nearest dollar, is

Answer 1

$307,230

Step-by-step explanation:

Provided details,

Today's date = January 1, 2020

Amount to be received = $50,000

Date of receiving = Jan 1, 2021

That is after 1 year.

Total period of receiving amount = 10 years

Discount rate = 10%

Discounted present value annuity factor =
`(1)/((1+0.1)^1) + (1)/((1+0.1)^2) + (1)/((1+0.1)^3) + (1)/((1+0.1)^4) + (1)/((1+0.1)^5) + (1)/((1+0.1)^6) + (1)/((1+0.1)^7) + (1)/((1+0.1)^8) + (1)/((1+0.1)^9) + (1)/((1+0.1)^1^0)`

= 6.1446

Thus, present value of $50,000 each year received for 10 years = $50,000
`*` 6.1446 = $307,230