Answer:
The annual cash flow is $5631.832765 rounded off to $5631.83
Step-by-step explanation:
An annuity is a series of cash flows which are of constant amount, occur after equal intervals of time and are for a limited of defined period of time. The present value of an annuity can be calculated using the following formula,
PV = Cash flow * [ (1 - (1+r)^-n) / r ]
Where,
- Cash flow is the constant annuity payment per period
- r is the required rate of return
- n is the number of periods
As the annuity is taken in exchange of $50000 today, we can say that the present value of annuity is $50000. Thus, to calculate the cash flow or annuity payment per period, we can input the available values of all the variables in the formula above.
Let the annual annuity payment or cash flow be x.
50000 = x * [ (1 - (1+0.0675)^-14) / 0.0675 ]
50000 / [ (1 - (1+0.0675)^-14) / 0.0675 ] = x
x = $5631.832765 rounded off to $5631.83