Insulor Inc. is expecting cash flows of $67,000 at the end of each year for the next five years. If the firm's discount rate is 17 percent, what is the present value of this annuity? (Round to the nearest dollar.)

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Quizplus · Accepted Answer

The present value of an annuity is calculated as follows:PV = C * [1 - (1 + r)^-n] / rwhere:C = cash flowr = discount raten = number of yearsIn this case, we have:C = $67,000r = 17%n = 5Plugging these values into the formula, we get:PV = $67,000 * [1 - (1 + 0.17)^-5] / 0.17= $67,000 * [1 - 0.4632] / 0.17= $67,000 * 0.5368 / 0.17= $214,356Therefore, the present value of the annuity is $214,356.