Bridget Jones has a contract in which she will receive the following payments fo

Question

Bridget Jones has a contract in which she will receive the following payments for the next five years: $11,000, $12,000, $13,000, $14,000, $15,000. She will then receive an annuity of $18,500 a year from the end of the sixth year through the end of the 15th year. The appropriate discount rate is 14 percent. a. What is the present value of all future payments? (Use a Financial calculator to arrive at the answer. Round the final answer to the nearest dollar amount.)                                                                                                                                        

Explanation / Answer

Cash flow PV factor PV value 1 11000 0.877193 9649.123 2 12000 0.769468 9233.61 3 13000 0.674972 8774.63 4 14000 0.59208 8289.124 5 15000 0.519369 7790.53 6-15   18500    2.70909 50118.11 Present Value of future cash flow 93855.13 ` 6.142168 Less PVIFA 14% 3 Years 3.433081 PV for 6-15 2.709087

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