Question

In: Accounting

Suppose you borrow money from your parents for college tuition on January​ 1, 2015. Your parents...

Suppose you borrow money from your parents for college tuition on January​ 1, 2015. Your parents require four annual payments of​ $40,000 each, with the first payment due on January​ 1, 2019. They are charging you​ 8% annual interest. What is the cost of the college​ tuition?

Solutions

Expert Solution

cost of the college​ tuition             1,051,709.23
Statement showing Cash flows
Particulars Time PVf 8% Amount PV
Cash Flows                              1.00                    0.9259                             -  
Cash Flows                              2.00                    0.8573                             -  
Cash Flows                              3.00                    0.7938                             -  
Cash Flows                              4.00                    0.7350           400,000.00           294,011.94
Cash Flows                              5.00                    0.6806           400,000.00           272,233.28
Cash Flows                              6.00                    0.6302           400,000.00           252,067.85
Cash Flows                              7.00                    0.5835           400,000.00           233,396.16
PV of Cash Flows        1,051,709.23

ekkarill92 answered 2 years ago
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