Question

Ambrin Corp. expects to receive $5000 per year for 10 years and $6500 per year for the next 10 years. What is the present value of this 20 year cash flow? Use an 12% discount rate. Use Appendix D and Appendix B to calculate the answer. (Round your intermediate calculations to the nearest dollar value.)

Options below:

		$40,076
		$64,975
		$48,550.5
		none of these

Answer 1

Calculation of present value:
Time	Cashflow	PVF @12%	PV
1	5000	0.8929	4,464.29
2	5000	0.7972	3,985.97
3	5000	0.7118	3,558.90
4	5000	0.6355	3,177.59
5	5000	0.5674	2,837.13
6	5000	0.5066	2,533.16
7	5000	0.4523	2,261.75
8	5000	0.4039	2,019.42
9	5000	0.3606	1,803.05
10	5000	0.3220	1,609.87
11	6500	0.2875	1,868.59
12	6500	0.2567	1,668.39
13	6500	0.2292	1,489.63
14	6500	0.2046	1,330.03
15	6500	0.1827	1,187.53
16	6500	0.1631	1,060.29
17	6500	0.1456	946.69
18	6500	0.1300	845.26
19	6500	0.1161	754.69
20	6500	0.1037	673.83
NPV			40,076.05
So correct answer is $40076