During four years of college, twins Molly and Marty each expect to receive gifts from grandparents...

During four years of college, twins Molly and Marty each expect to receive gifts from grandparents at $1000, $2000, $3000, and $4000 for Year 1, 2, 3 and 4, respectively. Each twin plans to save all of the funds in a money market fund expected to return 2% per year. What is the NPV (net present value) of the planned gifts for each twin?

Expert Solution

Ans $ 9425.08

Year	Project Cash Flows (i)	DF@ 2%	DF@ 2% (ii)	PV of Project ( (i) * (ii) )

1	1000	1/((1+2%)^1)	0.980392	980.39
2	2000	1/((1+2%)^2)	0.961169	1,922.34
3	3000	1/((1+2%)^3)	0.942322	2,826.97
4	4000	1/((1+2%)^4)	0.923845	3,695.38
		NPV	9,425.08

jeff jeffy answered 2 years ago

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During four years of college, twins Molly and Marty each expect to receive gifts from grandparents...

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