. Calculate the value of the investment. Caloulating Annuity Present Value-Exce

Question

. Calculate the value of the investment. Caloulating Annuity Present Value-Exce FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEWVIEW Sign in Cells Editing Formatting Table Styles Foat D20 AB An investment offers $6,100 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? What would the value be if the payments occurred for 40 years? For 75 years? Forever? Payment per year #Of years Required rate of returm # of years #Of years 100 15 40 75 1o 14 12 13 Complete the following analysis. Do not hard code values in your calculations. Your answers should be positive Value today with 15 years payments 59,244.72 Value today with 40 years payments S 91,782.41 Value today with 75 years payments 100.380.67 Value today of perpetuity

Explanation / Answer

Value today of perpetuity = 6100/(1+r)+6100(1+r)^2+6100/(1+r)^3+........

=> 6100/r (using the formula for sum of infinite GP which is a/(1-r) with a=1/(1+r) and r=1/(1+r))

=> 6100/6% =

$ 101,666.67

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