Company A promises to pay $1000 to company B at the end of each year, for 8 years. Both companies have an income tax rate of 20% and have savings accounts earning a nominal rate of 10%, compounded monthly. To company B, what is the present value of all the payments it will receive from company A?
The way I'm seeing it: 800[(1+0.8r)^8 -1]/[(0.8r)(1+0.8r)^8] = $4532.25; where r is the annual effective rate. (r = 0.1047130674)
The correct answer is given as $4195.69.