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What is the value today of receiving $2,562.00 per year forever? Assume the first payment is...

What is the value today of receiving $2,562.00 per year forever? Assume the first payment is made next year and the discount rate is 7.00%.

Answer format: Currency: Round to: 2 decimal places.

What is the value today of receiving $2,197.00 per year forever? Assume the first payment is made 8.00 years from today and the discount rate is 13.00%.

Answer format: Currency: Round to: 2 decimal places.

Solutions

Expert Solution

1)

Value today = Next year payment / required rate

Value today = 2,562,000 / 0.07

Value today = $36,600,000.00

7)

Value at year 7 = Payments / required rate

Value at year 7 = 2197 / 0.13

Value at year 7 = 16,900

Value today = Future value / (1 + r)^n

Value today = 16,900 / (1 + 0.13)^7

Value today = 16,900 / 2.352605

Value today = $7,183.53

jeff jeffy answered 2 years ago
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