question archive The ABC Block Company anticipates receiving $50,000 per year from its investments (with no change) over the next 12 years, with the first payment occuring exactly one year from now
The ABC Block Company anticipates receiving $50,000 per year from its investments (with no change) over the next 12 years, with the first payment occuring exactly one year from now
Subject:EconomicsPrice:3.87 Bought7
The ABC Block Company anticipates receiving $50,000 per year from its investments (with no change) over the next 12 years, with the first payment occuring exactly one year from now. If ABC's interest-free MARR is 9% and the general inflation rate is 3%, what is the net present value of these 12 cash flows?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
| Calculate discount Factor | |||
| MARR | 9% | ||
| GENERAL INFLATION RATE | 3% | ||
| DISCOUNT FACTOR=(1+NORMAL DISCOUNT RATE)/(1+INFLATION RATE)-1 | |||
| (1+.09)/(1+.03)-1 | 0.058252427 | ||
| Year | Cash flows | Discount Factor@5.83 | Present vale |
| 0 | 1 | ||
| 1 | 50000 | 0.944911651 | 47245.58254 |
| 2 | 50000 | 0.892858028 | 44642.90139 |
| 3 | 50000 | 0.843671953 | 42183.59764 |
| 4 | 50000 | 0.797195458 | 39859.77289 |
| 5 | 50000 | 0.753279276 | 37663.9638 |
| 6 | 50000 | 0.711782364 | 35589.1182 |
| 7 | 50000 | 0.672571449 | 33628.57243 |
| 8 | 50000 | 0.635520598 | 31776.02989 |
| 9 | 50000 | 0.600510817 | 30025.54086 |
| 10 | 50000 | 0.567429668 | 28371.48338 |
| 11 | 50000 | 0.536170904 | 26808.54519 |
| 12 | 50000 | 0.506634134 | 25331.70669 |
| 423126.8149 | |||
