Using a Discount Rate of 6%, Calculate the Present Value of a 5-year rental stream beginning...

Question

Question

Using a Discount Rate of 6%, Calculate the Present Value of a 5-year rental stream beginning in year 1 at $24,000 per year and escalating 3%/year.

business finance

Answer 1

Answer #1

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

=>

Present value = 24000/1.06 + 24000 * 1.03/1.06^2 + 24000 * 1.03^2/1.06^3 + 24000 * 1.03^3/1.06^4 + 24000 * 1.03^4/1.06^5

= 106978.38

Answer 2

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