Three years from now you will begin receiving annual payments of $7,200.This will continue for 14 years.At a discount rate of 5.8%,what is the present value of this stream of cash flows?
A) $60,534.84
B) $57,216.29
C) $64,045.86
D) $54,523.00
E) $51,253.11

Question

Quizplus · Accepted Answer

Step 1 - Calculate the present value of the cash flows.
PV = PMT × 11ea7fdb_fc1d_37e8_a768_73a96daa1f07_TB2902_11 PV = 7,200 × 11ea7fdb_fc1d_37e9_a768_4b8d2b0423b6_TB2902_11 = $67,760.52
Using a financial calculator:
N = 14, I = 5.8, PMT = -7,200, FV = 0, cpt PV = $67,760.52
Step 2 - Discount that back to today.
PV = 11ea7fdb_fc1d_37ea_a768_b73f22a094df_TB2902_11 = $60,534.84

Three Years from Now You Will Begin Receiving Annual Payments