PLEASE SHOW WORK USING THE FORMULAS BELOW: Eileen realizes she is going to miss

Question

PLEASE SHOW WORK USING THE FORMULAS BELOW: Eileen realizes she is going to miss helping students learn finance when she graduates so she has made arrangements ta provide tutoring by Skype. She negotiates a contract to be paid $8,000 at the beginning of each year for the next 4 years what is the value of this contract the day she receives the first payment? Assume annual interest rate of 3% FORMULAS Fh = C(1 + r)" Future Value of a Cash Flow Present Value of Future Cash Flow Present Value of a Perpetuity Present Value of an Annuity Cash Flow in an Annuity Present Value of a Growing Perpetuity PVC PV=Cxy1-( )n) 1+g Present Value of a Growing Annuity 1+7 1EAR (1 + APR Converting APR to EAR (APY) m-# compounding periods

Explanation / Answer

$8,000 being received at the beginning of each year for 4 years

Interest rate=3%

Value of the contract when first payment is received : C0 + C1(1+r) + C1(1+r)2 + C1(1+r)3

=8000 + 8000/(1.03) + 8000/(1.03)2 + 8000/(1.03)3

= 30,628.89

The present value of the contract when the payment is first received is $30,628.89

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.