Question

Year Amount of cash flow

1-4 $25,000 per year (payments at the end of the year)

5-9 $20,000 per year (payments at the end of the year)

Assume an interest rate of 6% compounded annually.

Calculate the present value of the stream of cash flows above.

Use .5919 as the PV factor

Answer #1

Using excel pv function, with nper = year, rate = 0.06,fv = amount, pmt = 0

cf | pv | |

1 | 25000 | 23,584.91 |

2 | 25000 | 22,249.91 |

3 | 25000 | 20,990.48 |

4 | 25000 | 19,802.34 |

5 | 20000 | 14,945.16 |

6 | 20000 | 14,099.21 |

7 | 20000 | 13,301.14 |

8 | 20000 | 12,548.25 |

9 | 20000 | 11,837.97 |

Total | 1,53,359.37 |

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