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Ambrin Corp expects to receive 2000 per year for 10 years and 3500 per year for the next 10 years What is the present value of this 20 year cash flow?
Wiki User
∙ 12y ago
You should ask these types of questions in the Mathematics category since this comes from a mathematics course. Otherwise, you'll just get a lot of answers with approximations or financial rules of thumb from people who have not taken this course.
Let a(n) = [1 - (1+i)^-n] / i, where
a(n) = present value of payments of $1 at the end of each period, computed 1 period before the first payment
n = number of periodic payments
i = effective periodic interest rate
Then PV = 3500*a(20) - 1500*a(10) = 3500 * (1 - 1.11^-20)/.11 - 1500 * (1 - 1.11^-10)/.11 = $19,037.80.
Wiki User
∙ 12y ago
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