Question

Don Draper has signed a contract that will pay him 70000 at the beginning of each year for the next 5 ​years, plus an additional 130000 at the end of year . If 8 percent is the appropriate discount​ rate, what is the present value of this​ contract?

Answer 1

Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.08^a	d=b*c
0	$     70,000	1	$           70,000.00
1	$     70,000	0.9259	$           64,814.81
2	$     70,000	0.8573	$           60,013.72
3	$     70,000	0.7938	$           55,568.26
4	$     70,000	0.7350	$           51,452.09
5	$ 1,30,000	0.6806	$           88,475.82
Present value			$       3,90,324.69