Question

A pine pan ation r turns t $200.cc0 per to its o nar h the fin 3 ycars. n 1he ollo ng 2 years the returns are $100,000 'year 4 and S 150,000 yar 5 espac y and ten the renm匕S200 000 per year pcrpent y. The c uma can be estad at % par annum hat s he present value to the c er the value n year 0 ? d. Tha pA to tha unar 2133

Answer 1

Present Value = 100,000*PVF(8%, 4 years)+150,000*PVF(8%, 5 years) + 200,000/8%*PVF(8%, 5 years)

= 100,000*0.735 + 150,000*0.681+ 2,500,000*0.681

= $1,878,150

I.e. B approx.