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An asset is projected to generate 10 annual cash flows of $9,000starting 4 years from...

An asset is projected to generate 10 annual cash flows of $9,000 starting 4 years from today. If the discount rate is 12%, how much is this asset worth today? Round to the nearest cent. [Hint: This is a deferred annuity. Remember the rule about where on the timeline PV annuity goes when you have a deferred annuity.]

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Expert Solution

The amount is computed as shown below:

Present value = Future value / (1 + r)n

So, the amount will be as follows:

= $ 9,000 / 1.124 + $ 9,000 / 1.125 + $ 9,000 / 1.126 + $ 9,000 / 1.127 + $ 9,000 / 1.128 + $ 9,000 / 1.129 + $ 9,000 / 1.1210 + $ 9,000 / 1.1211 + $ 9,000 / 1.1212 + $ 9,000 / 1.1213

= $ 36,195.45 Approximately

jeff jeffy answered 2 years ago
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