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2 years ago

What is the present value discount factor for a cash flow received in 8 years, at discount rate of 15%? PVIF (15%,8)

1 answer:

4 0

In financial modelling, the phrase "discount factor" is most frequently used to calculate the present value of future cash flows.

<h3>What is meant by present value discount factor?</h3>

By multiplying the cash flow for each anticipated year by the discount factor, which is determined by the discount rate and the corresponding time period, the present value of a cash flow, or the value of future cash in today's dollars, is determined. The discount rate is added to one, which is then raised to the negative power of a number of periods to get the discount factor, a weighing factor that is most frequently employed to determine the present value of future cash flows.

In financial modelling, the phrase "discount factor" is most frequently used to calculate the present value of future cash flows. The future cash flow is multiplied by a weighting factor (or decimal number) in order to discount it to the present value.

Given, cash flow received in 8 years at discount rate of 15%.

Present value discount factor = $1/ (1+discount rate)^{period number$

= 1/(1+0.15%)8

=0.3269

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Answer:

FV= $1,309,832.57

Explanation:

Giving the following information:

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<u>First, we need to calculate the future value of the annual deposit using the following formula:</u>

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {3,500*[(1.09^7) - 1]} / 0.09

FV= $32,201.52

<u>Now, the value when they are 70:</u>

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FV= PV*(1+i)^n

FV= 32,201.52*(1.09^43)

FV= $1,309,832.57

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