Question

Sharon Walsh has developed an educational software package. She agrees to sell the patent to Pensca for four annual payments of $50,000 each. The payments are to begin three years from today. Given an annual rate of 6%, what is the approximate present value of the four payments?

Answer 1

Answer:

$154,196.58

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator:

Cash flow each year from year 0 to 2 = 0

Cash flow each year from year 3 to 6 = $50,000

I = 6%

Pv = $154,196.58

To find the PV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you