Question
In: Accounting
our grandfather left you an inheritance of $105,000 to be paid in 30 years. At an...
our grandfather left you an inheritance of $105,000 to be paid in 30 years. At an interest rate of 11 percent, how much should you be willing to accept now in exchange for the future inheritance?
Solutions
Expert Solution
| CALCULATION OF PRESENT VALUE OF $ 1@ RATE of 11% | |||||
| Year | PVF of $ 1 @ 11 % | Year | PVF of $ 1 @ 11 % | ||
| 1 | 0.90090 | 16 | 0.18829 | ||
| 2 | 0.81162 | 17 | 0.16963 | ||
| 3 | 0.73119 | 18 | 0.15282 | ||
| 4 | 0.65873 | 19 | 0.13768 | ||
| 5 | 0.59345 | 20 | 0.12403 | ||
| 6 | 0.53464 | 21 | 0.11174 | ||
| 7 | 0.48166 | 22 | 0.10067 | ||
| 8 | 0.43393 | 23 | 0.09069 | ||
| 9 | 0.39092 | 24 | 0.08170 | ||
| 10 | 0.35218 | 25 | 0.07361 | ||
| 11 | 0.31728 | 26 | 0.06631 | ||
| 12 | 0.28584 | 27 | 0.05974 | ||
| 13 | 0.25751 | 28 | 0.05382 | ||
| 14 | 0.23199 | 29 | 0.04849 | ||
| 15 | 0.20900 | 30 | 0.04368 | ||
| CALCULATION OF PRESENT VALUE OF $ 105,000 TO BE PAID IN 30 YEARS | |||||
| PVF of $ 1 @ 11% in 30th year = | 0.04368 | ||||
| X By | "X" By | ||||
| Cash flow in year 30th | $ 1,05,000.00 | ||||
| Present Value | $ 4,586.70 | ||||
| Present Value (Round off nearest $) | $ 4,587 | ||||
| Answer = $ 4,587 | |||||
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