Question

What is the present value of the following annuity? $3,234 every year at the end of the year for the next 11 years, discounted back to the present at 16.20 percent per year, compounded annually?

Answer 1

Ans.	Present value of cash inflow = Annual cash inflows * Present value of an annuity of 1 of 16.20%
		$3,234 * 4.9892
		$16,135.07	(Approx.)
	*Working Notes:
	*Calculation of Present value factor @15 %.
	Year		PV @ 16.20%
	1	1 / (1 + 0.1620)^1	0.8606
	2	1 / (1 + 0.1620)^2	0.7406
	3	1 / (1 + 0.1620)^3	0.6374
	4	1 / (1 + 0.1620)^4	0.5485
	5	1 / (1 + 0.1620)^5	0.4720
	6	1 / (1 + 0.1620)^6	0.4062
	7	1 / (1 + 0.1620)^7	0.3496
	8	1 / (1 + 0.1620)^8	0.3009
	9	1 / (1 + 0.1620)^9	0.2589
	10	1 / (1 + 0.1620)^10	0.2228
	11	1 / (1 + 0.1620)^11	0.1917
	Total of Present value of an annuity		4.9892