Del Monty will receive the following payments at the end of the next three years

Question

Del Monty will receive the following payments at the end of the next three years: $12,000, $15,000, and $17,000. Then, from the end of the 4th through the end of the 10th year, he will receive an annuity of $18,000 per year. At a discount rate of 10%, what is the present value of all three future benefits?

Del Monty will receive the following payments at the end of the next three years: $12,000, $15,000, and $17,000. Then, from the end of the 4th through the end of the 10th year, he will receive an annuity of $18,000 per year. At a discount rate of 10%, what is the present value of all three future benefits?

Explanation / Answer

Answer:

Present value = 12000/(1+.1) + 15000/ (1+.1)^2 + 17000/ (1+.1)^3 +18000*((PVIF (10years, 10%)-(PVIF (3 years, 10%)

therefore present value = 10909.09 + 12396+ 12772 + 18000* (6.1445-2.4869)

Therefore present value = 101913

Thank you

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