Question

a. What is the present value of nine annual cash payments of $2,000, to be paid at the end of each year using an interest rate of 8%?

Answer 1

YEAR	BASE (8%)	PV FACTOR (A)	CASH OUTFLOWS [B)	PV OF CASH FLOW B*A
1	1/1.08	0.926	2000.00	1851.85
2	(1/1.08)^2	0.857	2000.00	1714.68
3	(1/1.08)^3	0.794	2000.00	1587.66
4	(1/1.08)^4	0.735	2000.00	1470.06
5	(1/1.08)^5	0.681	2000.00	1361.17
6	(1/1.08)^6	0.630	2000.00	1260.34
7	(1/1.08)^7	0.583	2000.00	1166.98
8	(1/1.08)^8	0.540	2000.00	1080.54
9	(1/1.08)^9	0.500	2000.00	1000.50
	NET PRESENT VALUE		12493.78

Answer is 12494 Approx