Answer:
Present value (PV) is a financial concept that measures the current worth of a future sum of money or stream of cash flows. It is used to compare the value of money at different points in time and is often used in investment analysis, capital budgeting, and valuation.
Step-by-step explanation:
To find the present value of a series of cash flows, you can use the formula:
PV = CF1 / (1+r)^1 + CF2 / (1+r)^2 + ... + CFn / (1+r)^n
where:
PV = present value
CF = cash flow
r = discount rate (10% in this case)
n = number of periods
In this case, the first payment is received 6 years from today, and the last payment is received 20 years from today, so the number of payments is 20-6 = 14 payments.
So the present value of the cash flows is:
PV = 3500 / (1+0.1)^1 + 3500 / (1+0.1)^2 + ... + 3500 / (1+0.1)^14
PV = $26,196.15
So the present value of $3,500 per year, at a discount rate of 10 percent, if the first payment is received 6 years from today and the last payment is received 20 years from today is $26,196.15