Answer:
$1,449,635.50
Explanation:
The computation of the value of the property today is shown below:
First the present value for 5 years is
Year Cash flows Discount factor Present value
1 $150,000 0.925925926 $138,888.89
2 $150,000 0.85733882 $128,600.82
3 $150,000 0.793832241 $119,074.84
4 $150,000 0.735029853 $110,254.48
5 $150,000 0.680583197 $102,087.48
Total present value $598,906.51
The discount factor is
= 1 ÷ (1 + rate)^years
And, the formula of future value is
Future value = Present value × (1 + rate)^number of years
$1,250,000 = Present value × (1 + 0.08)^5
$1,250,000 = Present value × 1.469328077
So, the present value is $850,729
Now the today value of the property is
= $598,906.51
+ $850,729
= $1,449,635.50
