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
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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