a. What is the present value of end-of-year cash flows of $7,000 per year, with the...

a. What is the present value of end-of-year cash flows of $7,000 per year, with the first cash flow received five years from today and the last one 40 years from today? Assume interest rate of 10%.

$41,271.67
$44,496.49
$45,733.15
$46,264.30
$50,218.30

b. What is the value of a 30-year annuity that pays $1250 a year? The annuity’s first payment will be received on year 11. Also, assume that the annual interest rate is 6 percent for years 1 through 10 and 7 percent hereafter.

$14,271.67
$15,511.30
c. $12,733.15
$9,969.81
$8,661.43

Expert Solution

PV = CF Flow * PVF

Here those Cashflows are there from Year 5

OPtion 4 is Correct

Part B:

PVF is combination of Two, CFs are discounted till 10 years @7% & for first 10 Year @6%

OPtion 5 is correct.

jeff jeffy answered 1 year ago

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