Answer:
PV ( in year 0 terms) = $15,291.77
Explanation:
An annuity starting in six years time and ends 20 years from now would give 15 annual cash inflows.
The present value of such annuity would be calculated in two (2) steps as follows:
Step 1: PV of annuity (in year 5 terms)
PV of annuity (in year 5 terms)= A× (1- (1+r)^(-n) )/r
A-2,625, r- 8%, n-15
PV = 2,625, × (1- (1+0.08)^(-15))/0.08= 22,468.632
Step 2:PV ( in year 0 terms)
PV ( in year 0 terms) = FV × (1+r)^(-n)
FV- 2,468.632, r-8%, n-5
PV = 2,468.632 × 1.08^(-5) = 15,291.7731
PV ( in year 0 terms) = $15,291.77
Present Value = $15,291.77
