Question

Consider a series of end-of-period CFs spanning 2042-2057, which decrease at a 1% rate each period. The amount of the first CF in the series is $143. The interest rate is 3.3%. What is the equivalent value of this series at the beginning of 2042? (answer: $1,641.26) Can you show either by hand or excel?

Answer #1

Answer is Equivalent amount is $1641.26

The explanation is as follows:

YEAR | CASHFLOW | PVF @ 3.3% | PRESENT VALUE |

2042 | 143.00 | 0.968 | 138.43 |

2043 | 141.57 | 0.937 | 132.67 |

2044 | 140.15 | 0.907 | 127.15 |

2045 | 138.75 | 0.878 | 121.85 |

2046 | 137.37 | 0.850 | 116.78 |

2047 | 135.99 | 0.823 | 111.92 |

2048 | 134.63 | 0.797 | 107.26 |

2049 | 133.29 | 0.771 | 102.80 |

2050 | 131.95 | 0.747 | 98.52 |

2051 | 130.63 | 0.723 | 94.42 |

2052 | 129.33 | 0.700 | 90.49 |

2053 | 128.03 | 0.677 | 86.72 |

2054 | 126.75 | 0.656 | 83.11 |

2055 | 125.49 | 0.635 | 79.65 |

2056 | 124.23 | 0.614 | 76.34 |

2057 | 122.99 | 0.595 | 73.16 |

Equivalent amount of series | 1641.26 |

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