samb38111 samb38111

13-09-2022
Business

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you found out that now you are going to receive payments of $7,500 for the next 16 years. you will receive these payments at the beginning of each year. the annual interest rate will remain constant at 14%. what is the present value of these payments?

Answer :

Tutorconsortium315 Tutorconsortium315

15-09-2022

53566 is the present value of these payments.

PVAn= 7500 x (1- 1 divided by (1+0.14)^16)

all divided by 0.14 =46988

PVA(DUE)n= 46988 x (1+0.14)= 53566

What is present value?

The idea of present value holds that a sum of money is worth more today than it will be in the future. In other words, money received in the future is not as valuable as money received now. The value of $1,000 today is greater than $1,000 in five years.

The present value calculation can be used to determine the value of a property today expected to earn at least the projected stream of cash flows in the future, or the amounts that must be invested today in order to reap desired sums at later dates.

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