Question

What is the value today of a money machine that will pay $4,927.00 per year for 28.00 years? Assume the first payment is made 10.00 years from today and the interest rate is 11.00%.

Answer #1

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=4,927/1.11^10+4,927/1.11^11+4,927/1.11^12+4,927/1.11^13+4,927/1.11^14+4,927/1.11^15+4,927/1.11^16+4,927/1.11^17+4,927/1.11^18+4,927/1.11^19+4,927/1.11^20+4,927/1.11^21+4,927/1.11^22+4,927/1.11^23+4,927/1.11^24+4,927/1.11^25+4,927/1.11^26+4,927/1.11^27+4,927/1.11^28+4,927/1.11^29+4,927/1.11^30+4,927/1.11^31+4,927/1.11^32+4,927/1.11^33+4,927/1.11^34+4,927/1.11^35+4,927/1.11^36+4,927/1.11^37

which is equal to

**=$16567.47(Approx)**

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