You will receive annual payments of $20,000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15% What is the present value of the payments? Future Value of 1 (15%, 4 periods) = 1.74901 Future Value of an Annuity of 1 (15%, 4 periods) = 4.99338 Present Value of 1 (15%, 4 periods) = 0.57175 Present Value of an Annuity of 1 (15%, 4 periods) = 2.85498 Group of answer choices $57,099.60 $80,000.00 $31,470.30 $72,095.60

Question

Andreas Reynolds

Business

4 March, 15:03

You will receive annual payments of $20,000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15% What is the present value of the payments? Future Value of 1 (15%, 4 periods) = 1.74901 Future Value of an Annuity of 1 (15%, 4 periods) = 4.99338 Present Value of 1 (15%, 4 periods) = 0.57175 Present Value of an Annuity of 1 (15%, 4 periods) = 2.85498 Group of answer choices $57,099.60 $80,000.00 $31,470.30 $72,095.60

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Answers (1)

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Kara Branch · Answer 1

Present Value = $57,099.57

Explanation:

The Present Value of a series of future equal amount is the amount the sum in today's terms that would make one to be indifferent. It is the future series of cash flows discounted at the opportunity cost rate of return.

Present Value = A * (1 - (1+r) ^ (-n)) / r

A - annual cash flow - 20,000, r - discount rate - 15%, n number of years - 4

PV = 20,000 * (1 - 1.15^ (-4)) / 0.15

= 20,000 * 2.85498

= $57,099.57