Question

You will receive annual payments of $800 at the end of each year for 12 years. The first payment will be received three years from today. What is the present value of these payments if the discount rate is 7 percent

Answer 1

Answer:

= $5,839.92

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator

Cash flow each year from year 0 to 2 = 0

Cash flow each year from year 3 to 15 = $800

I = 7%

Present value = $5,839.92

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you