Today is January 1, 2011. On January 1 of the years 2012 through 2021 you are to receive$50,000. If the cash flows are discounted at 10% a year, what is the present value of these cash flows as of today? (Give your answer to the nearest dollar)

Printable View

- Jul 28th 2010, 05:20 AMjamesk486is this an annuity?
Today is January 1, 2011. On January 1 of the years 2012 through 2021 you are to receive$50,000. If the cash flows are discounted at 10% a year, what is the present value of these cash flows as of today? (Give your answer to the nearest dollar)

- Jul 28th 2010, 07:50 AMSpringFan25
yes, that is an annuity. The formula for the present value of an annuity is

$\displaystyle \displaystyle S \times a_{\bar{n|}} = S \times \frac{1-v^n}{i}$

S= payment amount

i = annual interest rate

v = 1/(1+i)

n=number of payments

It is difficult to believe that you would have been asked to do this question without being told the formula to do it. Review your course notes or read this

http://www.mathhelpforum.com/math-he...nt-values.html - Jul 29th 2010, 08:12 PMjamesk486
do we count starting from 2012? not sure if it is 9 years or 10 years..

- Jul 30th 2010, 02:11 PMSpringFan25
i would read "2012 through 2021" as 2012-2021 inclusive, which is 10 years.