Suppose the present vaule of a 5 year ordinary annuity is $528, if the discount rate...

Suppose the present vaule of a 5 year ordinary annuity is $528, if the discount rate is 14%, what must the annual cash flow be?

Expert Solution

Present value = Annual cash flow{[1 - (1 + r)^-n] / r}

$528 = Annual cash flow{[1 - (1 + 0.14)^-5] / 0.14}

$528 = Annual cash flow(3.433080968)

Annual cash flow = $528 / 3.433080968

Annual cash flow = $153.80

jeff jeffy answered 2 years ago

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