Question

Compute the present value of an annuity in which hourly payments (8760 each year) of $0.17 are made for 3 years at an annual rate of 1.6%.

answer is 4,362 but I can't figure out why

Answer 1

Present Value =1489.2*1/(1.016)^1+1489.2*1/(1.016)^2+1489.2*1/(1.016)^3

= $ 4,326

Answer = $ 4,326

Note:

Cash Flow per year = 8760 * $0.17

= 1489.2

Discounting Factor (1.6%) for Year 1 = 1/(1.016)^1

Discounting Factor (1.6%) for Year 2 = 1/(1.016)^2

Discounting Factor (1.6%) for Year 3 = 1/(1.016)^3

Year	Cash Flow	Discounting Factor (1.6%)	Cash Flow * Discounting Factor
1	1489.2	0.984	1465
2	1489.2	0.968	1442
3	1489.2	0.953	1419
		Present Value=	4326