Question

In: Finance

Ambrin Corp. expects to receive $5000 per year for 10 years and $6500 per year for...

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

Solutions

Expert Solution

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

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