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Assume the appropriate discount rate is 8%. You will receive a payment every year for the...

Assume the appropriate discount rate is 8%. You will receive a payment every year for the next 13 years, which will grow at 4% annually. The amount of the first payment will be $6,000. What is the current value of this series of payments?

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Expert Solution

Current value of growing annuity = payment/(r - g) * (1 - ((1+g)/(1+r))^n)

= 6000/(.08 - .04) * (1 - ((1.04/1.08))^13)

= 6000/.04 * (1 - .612244)

= 58163.39

jeff jeffy answered 2 years ago
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