Question

What is the present value of the following series of cash payments: $8,000 per year for four consecutive years starting one year from today, followed by annual cash payments that increase by 2% per year in perpetuity (i.e. cash payment in year 5 is $8,000*1.02, cash payment in year 6 is $8,000*1.022, etc.)? Assume the appropriate discount rate is 5%/year. ( PLZ USE EXCEL TO ANSWER IT)

Answer #1

Present value of series of cash
payments: $8,000 per year for four consecutive years starting one
year from today, followed by annual cash payments that increase by
2% per year in perpetuity= **$247,754.93**

Details of calculation as below:

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Please show which equations you used and please do not use excel
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