You are paid to teach classes for the university and wonder how much money the university makes from your graduate-level classes.Based on historical data,you determine that your summer classes for the next seven years will generate an average annual revenue of $93,850.If you discount these cash flows at an annual rate of 8.30%,what is the present value of the expected cash flows?
A)$656,950.00
B)$845,133.52
C)$483,644.36
D)$523,786.85

Question

Quizplus · Accepted Answer

The present value of the expected cash flows can be calculated using the formula for the present value of an annuity. The formula is PV = C * [(1 - (1 + r)^-n) / r], where C is the annual cash flow, r is the discount rate, and n is the number of years. Plugging in the values: PV = $93,850 * [(1 - (1 + 0.083)^-7) / 0.083] = $483,644.36.

You Are Paid to Teach Classes for the University and Wonder