Question

Suppose that you will receive annual payments of $10,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5%, what is the present value of this stream of payments? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

$71,753.93

Step-by-step explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator.

Cash flow each year from year 1 -3 = 0

Cash flow each year from year 4 to 14 = 10,000

I = 5%

Present value = $71,753.93

To find the PV using a financial calacutor:

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

I hope my answer helps you