Answer:
Present value of Helen's inheritance is $361,997.25
Explanation:
We know,
Present value of cash flows = ∑
Given,
Cash flows for 1st, 2nd, 3rd, and 4th year = $50,000, $75,000, $125,000, and $250,000.
Interest rate, i = 11% = 0.11
Number of period, n = 4
Therefore,
Present value of cash flows = [$50,000 ÷ ] + [$75,000 ÷
] + [$125,000 ÷
] + [$250,000 ÷
]
Present value of cash flows = ($50,000 ÷ 1.11) + ($75,000 ÷ 1.2321) + ($125,000 ÷ 1.3676) + ($250,000 ÷ 1.5181)
Present value of cash flows = $45,045.05 + $60,871.68 + $91,400.99 + $164,679.53
Present value of cash flows = $361,997.25
Therefore, Present value of Helen's inheritance is $361,997.25