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Cerrena [4.2K]
3 years ago
10

You just won the grand prize in a national writing contest! As your prize, you will receive $1,000 a month for 15 years. If you

can earn 7 percent on your money, what is this prize worth to you today
Business
1 answer:
skelet666 [1.2K]3 years ago
6 0

Answer:

The prize is worth $111,258.73.

Explanation:

Giving the following information:

Cf= $1,000 a month

Interest rate= 0.07/12= 0.005833

Number of months= 15*12= 180

First, we need to calculate the final value:

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

A= cash flow

FV= {1,000*[(1.005833^180) - 1]} / 0.005833

FV= $316,951.28

Now, the present value:

PV= FV/(1+i)^n

PV= 316,951.28/(1.005833^180)

PV= $111,258.73

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3 years ago
Bedeker, Inc., has an issue of preferred stock outstanding that pays a $3.35 dividend every year in perpetuity. If this issue cu
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