Question

Lester’s Meats just settled a law suit and will receive 5 annual payments as a settlement. The first payment will be received one year from today in the amount of $134,000. Each annual payment will be 7 percent larger than the previous year’s payment. What is the present value of this settlement at a discount rate of 8.8 percent?

How do i type this into a BA 11 Plus calc?

Answer 1

PV of annuity for growing annuity
P = (PMT/(r-g)) x (1-((1+g)/(1 + r)) ^n)
Where:
P = the present value of an annuity stream	P
PMT = the dollar amount of first payment	$134,000.00
r = the effective interest rate (also known as the discount rate)	8.80%
n = the number of periods in which payments will be made	5
g= Growth rate	7%
PV of annuity=	(PMT/(r-g)) x (1-((1+g)/(1 + r)) ^n)
PV of annuity=	(134000/(8.8%-7%))*(1-((1+7%)/(1+8.8%))^5)
PV of annuity=	$595,767.12