Question

K. Shiryayeva will receive $32,000 per year for the next 20 years (assume she receives the first payment one year from today) for her work as a short-order fry cook. What is the today's value of these cash flows if the appropriate discount rate is 8 percent?

• The value is less than 5100,000

• The value Is greater than or equal lo $300,000 but less ihan $305.000

• The value is greater than or equal to $305,000 but less than $310,000

• The value is greater than et equal to $310000 but less than $315,000

• The value is greater than or equal to $315,000

 

Answer 1

The option (4) is right option.

 

Explanation:

present value of cash flow	annual payment*PVAF at 8% for 20 years	32000*9.8181	314179.2
PVAF at 8% for 20 years	1-(1+r)^-n /r	1-(1+8%)^20 /8%	.785451/8%	9.8181375
Option is (4)	The value is greater than or equal t0 310000 but less than 315000

The option (4) is right option.