Calculate the following (assume all payments are made at the end of the year).
a. What is the value today of a $10,000 payment made in perpetuity assuming a 8% discount rate?
b. Assume the same perpetuity as above but the payments will not begin for another five years. What is the present value of such a perpetuity?
c. What is the present value of a 5 year annuity which pays $10,000 per year and with an interest rate of 8%?
d. You are told you will receive the following cash payments at the end of the next three years:
Year 1: ...... $10,000
Year 2: ...... $25,000
Year 3: ...... $50,000
Assuming a discount rate of 12%, what is present value of all payments?

  • CreatedJuly 26, 2013
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