Question

provides an ordinary annuity of $100,000 to be received at the end of each of the next 3 years, discounted annually at 5 percent. the net present value (npv) is _____

Answer 1

To calculate the net present value (NPV) of an ordinary annuity, we need to determine the present value of each payment and then sum them up.

Step-by-step explanation:

To calculate the net present value (NPV) of an ordinary annuity, we need to determine the present value of each payment and then sum them up. In this case, the annuity provides $100,000 at the end of each of the next 3 years, discounted annually at 5 percent. To find the present value of each payment, we use the formula:

Present Value = Payment / (1 + Interest Rate)^Period

Using this formula, we can calculate the present value of each $100,000 payment and then sum them up to find the NPV.