Question

You expect to receive year-end bonuses of $8,000 at the end of this year, $16,000 at the end of year 4, $20,000 at the end of year 8, and $25,000 at the end of year 10. If your opportunity cost is 6%, what is the present value today of your expected future bonuses?

Answer 1

Total PV= $46,728.79

Step-by-step explanation:

Giving the following information:

Cash flow:

Cf1= $8,000

Cf4= $16,000

Cf8= $20,000

Cf10= $25,000

Discount rate= 6%

To calculate the present value, we need to use the following formula on each cash flow:

PV= FV/(1+i)^n

Cf1= 8,000/(1.06^1)= 7,547.17

Cf4= 16,000/(1.06^4)= 12,673.50

Cf8= 20,000/(1.06^8)= 12,548.25

Cf10= 25,000/(1.06^10)= 13,959.87

Total PV= $46,728.79