An investment offers $6,700 per year for 15 years, with the first payment occurr

Question

An investment offers $6,700 per year for 15 years, with the first payment occurring one year from now.
  

If the required return is 6 percent, what is the value of the investment today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Present value $  

What would the value today be if the payments occurred for 40 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Present value $  

What would the value today be if the payments occurred for 75 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Present value $  

What would the value today be if the payments occurred forever? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Present value $

Explanation / Answer

Present value in case payment are due at the end

= amount × pvaf , 1/(1+ rate ) t

1. 6700 × pvaf (1/1.06)15

= 6700 × 9.712

= $65070

2. 6700 × pvaf(1/1.06)40

= 6700 × 15.04

=$100810

3. 6700 ×( 1/1.06)75 pvaf

= 6700 × 16.45

=$110254

4. 6700 /6%

= $111666.67

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