Question

Your grandfather left an inheritance for you of $80,000. However you can only drawdown on the investment as follows: Years 1 – 4 $10,000 each year and Year 5 $40,000 Interest on the fund is 7.5%. What is the present worth of this inheritance?

Answer 1

Year	Withdrawal	Discounting factor	Discounted CF
1	$ 10,000.00	1.00000	$       10,000.00
2	$ 10,000.00	0.93023	$         9,302.33
3	$ 10,000.00	0.86533	$         8,653.33
4	$ 10,000.00	0.80496	$         8,049.61
5	$ 40,000.00	0.74880	$       29,952.02
	Present worth =		$ 65,957.28