Question

You have just turned 27 and may now spend a portion of the trust fund your parents established for you. The terms of the trust fund allow you to withdraw 50 beginning−of−the−year cash flows of​ $40,000 each. An investment firm has offered to pay you cash for all of the fund today. If the rate they use to discount the cash flows is​ 14% per​ year, what is their offer price today for your pension​ fund?

Answer 1

Answer:

the present value is $325,249.13

Explanation:

The computation of the offer price today is given below:

It means we have to measure the present value

Given that

RATE is 14%

NPER is 50

PMT is $40,000

FV is $0

The formula is given below:

=-PV(RATE,NPER,PMT,FV,PV,TYPE)

After applying the above formula, the present value is $325,249.13