Question

What is the value today of $1,300 per year, at a discount rate of 9 percent, if the first payment is received 8 years from now and the last payment is received 25 years from today

Answer 1

$6,226.52

Step-by-step explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow year 1 to 7 = 0

Cash flow each year from year 8 to 25 = 1300

I = 9%

PV = $6,226.52

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute