Question

Today is January 1, 2020. On January 1 of the years 2021 through 2030, you are to receive $50,000. If cash flows are discounted at 10% per year, the present value of these cash flows (as of today), rounded to the nearest dollar, is

Answer 1

Answer:

$307,230

Explanation:

Provided details,

Today's date = January 1, 2020

Amount to be received = $50,000

Date of receiving = Jan 1, 2021

That is after 1 year.

Total period of receiving amount = 10 years

Discount rate = 10%

Discounted present value annuity factor = $\frac{1}{(1+0.1)^1} + \frac{1}{(1+0.1)^2} + \frac{1}{(1+0.1)^3} + \frac{1}{(1+0.1)^4} + \frac{1}{(1+0.1)^5} + \frac{1}{(1+0.1)^6} + \frac{1}{(1+0.1)^7} + \frac{1}{(1+0.1)^8} + \frac{1}{(1+0.1)^9} + \frac{1}{(1+0.1)^1^0}$

= 6.1446

Thus, present value of $50,000 each year received for 10 years = $50,000 $\times$ 6.1446 = $307,230