A wealthy woman just died and left her pet cats the following estate: $50,000 per year for the next 15 years with the first cash flow today.At a discount rate of 3.2%,what is the feline estate worth in today's dollars?

Question

Quizplus · Accepted Answer

This is a simple case of calculating the present value of an annuity due. Using the formula: PV = (C/r) x (1 - 1/(1+r)^n), where PV is the present value, C is the annual cash flow, r is the discount rate, and n is the number of years. Plugging in the values given, we get PV = (50,000/0.032) x (1 - 1/(1+0.032)^15) = $607,180.14. Therefore, the best choice is B.

A Wealthy Woman Just Died and Left Her Pet Cats