Question

You are promised $10,000 a year for six years after which you will receive $5,000 a year for six years. If you can earn 8 percent annually, what is the present value of this stream of payments?

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Answer 1

Ans $ 60794.79

Year	Project Cash Flows (i)	DF@ 8%	DF@ 8% (ii)	PV of Project ( (i) * (ii) )
1	10000	1/((1+8%)^1)	0.926	9,259.26
2	10000	1/((1+8%)^2)	0.857	8,573.39
3	10000	1/((1+8%)^3)	0.794	7,938.32
4	10000	1/((1+8%)^4)	0.735	7,350.30
5	10000	1/((1+8%)^5)	0.681	6,805.83
6	10000	1/((1+8%)^6)	0.630	6,301.70
7	5000	1/((1+8%)^7)	0.583	2,917.45
8	5000	1/((1+8%)^8)	0.540	2,701.34
9	5000	1/((1+8%)^9)	0.500	2,501.24
10	5000	1/((1+8%)^10)	0.463	2,315.97
11	5000	1/((1+8%)^11)	0.429	2,144.41
12	5000	1/((1+8%)^12)	0.397	1,985.57
		NPV		60,794.79