Question

Present Value of Money Flow Each function in Exercise represents the rate of flow of money (in dollars per year) over the given time period, compounded continuously at the given annual interest rate. Find the present value in case.

f(t)=25,000, 12 years, 10%

Answer 1

The present value is $ 170,350.

Explanation:

The present value can be calculated by using simple discounting formula for annuity given below.

PV = CF ((1-(1+i)^n)/i)

PV = 25,000 * 6.814 (n=12, i=10%)

PV = $ 170,350