Final answer:
To calculate the present value of $1,400 a year at a discount rate of 8%, use the present value formula: PV = C / (1 + r)ⁿ. Plug in the values to get the present value of $781.94.
Step-by-step explanation:
To calculate the present value of $1,400 a year at a discount rate of 8%, we need to apply the present value formula. The formula is PV = C / (1 + r)ⁿ, where PV is the present value, C is the future cash flow, r is the discount rate, and n is the number of periods. In this case, the future cash flow is $1,400, the discount rate is 8%, and the number of periods is 25. Plugging in these values, we get:
PV = 1400 / (1 + 0.08)⁷ = $781.94
Therefore, the present value of $1,400 received annually for 25 years at an 8% discount rate, with the first payment received 7 years from now, is $781.94.