Question

What is the value today of $1,800 per year, at a discount rate of 9 percent, if the first payment is received 7 years from now and the last payment is received 30 years from today?

Answer 1

Note that no payment is received from years 1 to 6 and $1800 is received as payments from year 7 to 30.

So at the end of year 6, the present value of the 24 (=30 - 6) payments from year 7 to 30 at a discount rate of 9 % can be calculated as below:

Use financial calculator or spreadsheet to find the above value:

Now the value of $17,471.90 as of today (6 years before PV₆) will be: (there are no payments in these years)

Hence the required value as of today is: $ 10,417.92