SOLUTION: A man agrees to make $5000 payments at the ends of the first 5 years, $4000 at the ends of the next 5 years, and $3000 at the ends of the next 5 years. If money is worth 4%, find t
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Question 1195214: A man agrees to make $5000 payments at the ends of the first 5 years, $4000 at the ends of the next 5 years, and $3000 at the ends of the next 5 years. If money is worth 4%, find the present value of this agreement. Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website! interest rate is 4% per year.
growth factor is 1.04 per year.
present value of cash flow is equal to $45,917.88
i used excel to do the calculations.
see below:
the present value of all cash flows are brought back to end of year 0.
for example, 3000 dollar cash flow at end of year 15 is divided by 1.04^15 to get present value of 1665.793508 which is displayed as 1665.79.
let me know if you have any questions.
theo
