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An investment, which is worth 140,930 dollars and has an expected return of 8.63 percent, is...

An investment, which is worth 140,930 dollars and has an expected return of 8.63 percent, is expected to pay fixed annual cash flows for a given amount of time. The first annual cash flow is expected later today and the last annual cash flow is expected in 10 years from today. What is the present value of the annual cash flow that is expected in 8 years from today?

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Answer #1

The present value of annual cash flow is found using present value of annuity due equation.

The first step is to find out how much fixed annual cash flow the deposit will make for a period of 10 years. Using the above equation, we can find out the annual payment.

Solving for A in the above equation. The annual payment equals $ 19887.13

Using the annual payment calculated above , we can find out the present value expected 8 years from today.

Present value expected 8 years from today = $ 121,232.96 $ 121233

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