An investor receives X dollars at the end of each of the next 3 years.If the present value of her investment is $10 million,what is her yearly cash flow,given that the interest rate is 5%?

Question

Quizplus · Accepted Answer

The present value (PV) of an annuity formula is used to calculate the yearly cash flow, X. The formula is: PV = X * [(1 - (1 + r)^-n) / r], where r is the interest rate, and n is the number of periods. Plugging in the values: $10 million = X * [(1 - (1 + 0.05)^-3) / 0.05]. Solving for X gives approximately $3.672 million.

An Investor Receives X Dollars at the End of Each