You wrote a piece of software that does a better job of allowing computers to ne

Question

You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $452,000 today, plus $452,000 at the end of each of the following six years for permission to do this. If the appropriate interest rate is 7 percent, what is the present value of the cash flow stream that the company is offering you? (Round answer to the nearest whole dollar, e.g. 5,275.) Present value $

Explanation / Answer

total present value = present value of period 0 + ... present value of period 6

= $452,000 + $452000/1.07 + 452000/1.07^2 + ... 452000/1.07^6

= $2,606,476

=$452,000.00 +$422,429.91 +$394,794.31 +$368,966.64 +$344,828.64 +$322,269.75 +$301,186.69

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