Question

Bridget Jones has a contract in which she will receive the following payments for the next five years: $19,000, $20,000, $21,000, $22,000, $23,000. She will then receive an annuity of $26,500 a year from the end of the sixth year through the end of the 15th year. The appropriate discount rate is 18 percent. a. What is the present value of all future payments?

Answer 1

Present Value = PV of CFs

= Sum [ Cash Flow * PVF(r%, n) ]

PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

Year	Cash flow	PVF @18%	PV of CFs
1	$ 19,000.00	0.8475	$    16,101.69
2	$ 20,000.00	0.7182	$    14,363.69
3	$ 21,000.00	0.6086	$    12,781.25
4	$ 22,000.00	0.5158	$    11,347.36
5	$ 23,000.00	0.4371	$    10,053.51
6	$ 26,500.00	0.3704	$      9,816.44
7	$ 26,500.00	0.3139	$      8,319.01
8	$ 26,500.00	0.2660	$      7,050.01
9	$ 26,500.00	0.2255	$      5,974.59
10	$ 26,500.00	0.1911	$      5,063.21
11	$ 26,500.00	0.1619	$      4,290.85
12	$ 26,500.00	0.1372	$      3,636.32
13	$ 26,500.00	0.1163	$      3,081.62
14	$ 26,500.00	0.0985	$      2,611.55
15	$ 26,500.00	0.0835	$      2,213.18
PV of CFs			$ 116,704.27