You are presented with an investment opportunity that will give you the following stream of cash flows:

You are presented with an investment opportunity that will give you the following stream of cash flows: nothing for the next 5 years; at the following year, an amount of $2,000 per year until year 13; and then an amount of $10,000 per year until year 23. If your required rate of return (APR) is 8% compounded annually, what is the present value today of these cash flows?

Do not use the $ sign. Use commas to separate thousands. Use to decimals. Round to the nearest dollar. For example if you obtain $1,432.728 then enter1,433; if you obtain $432.00 then enter432

Answer:________

Solutions

Expert Solution

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=2000/1.08^6+2000/1.08^7+2000/1.08^8+2000/1.08^9+2000/1.08^10+2000/1.08^11+2000/1.08^12+2000/1.08^13+10,000/1.08^14+10,000/1.08^15+10,000/1.08^16+10,000/1.08^17+10,000/1.08^18+10,000/1.08^19+10,000/1.08^20+10,000/1.08^21+10,000/1.08^22+10,000/1.08^23

which is equal to

=32,495(Approx)

jeff jeffy answered 2 years ago

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