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You will receive annual payments of $5,000 at the end of each year for 10 years,...

You will receive annual payments of $5,000 at the end of each year for 10 years, but the first payment will be received in year 3. What is the present value of these payments if the discount rate is 8 percent? $30,260.49 $26,633.40 $28,251.12 $24,387.13

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Homework Answers

Answer #1

Step 1: Find the discounted value of cash flows at year 3:

Here, we can use the present value of the annuity formula:

Where,
PVA = Present value of the annuity
A = Annuity or cash flow
i = Interest rate in decimal form
n = Number of years

Step 2: Discount the above value to today's value:

Where,
PV = Present value
FV = Future value

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