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: $2,000, $3,500, and $4,500. Then, from the end of the 4th through the end of the 10th year, he will receive an annuity of $5,000 per year.

At a discount rate of 9 percent, what is the present value of all three future benefits? Use Appendix B andAppendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Del Monty will receive the following payments at the end of the next three years: $2,000, $3,500, and $4,500. Then, from the end of the 4th through the end of the 10th year, he will receive an annuity of $5,000 per year.

Explanation / Answer

Discount rate 9% Year 1 2 3 4 5 6 7 8 9 10 Cash flow 2000 3500 4500 5000 5000 5000 5000 5000 5000 5000 Present value of cash flow@9% 1834.862 2945.88 3474.826 3542.126 3249.657 2981.337 2735.171 2509.331 2302.139 2112.054 Present value of all future cashflow 27,687.38

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