Question

After your vehicle got hit by a truck, you have been offered a settlement. In the agreement, you would receive $50,000/year starting in 1 year for 25 years, then $25,000/year for 12 years beginning in year 26. If your discount rate is 5%, which of the following is the present value of this settlement?

733,458

767,015

770,131

792,878

803,190

None of the above.

Answer 1

Present value $ $ $ Year Cash flow PVIF@5% 0 $ 1.000 $ 1 $ 50,000 0.952 $ 2 $ 50,000 0.907 3 $ 50,000 0.864 $ 4 $ 50,000 0.823 $ 5 $ 50,000 0.784 $ 6 $ 50,000 0.746 $ 7 $ 50,000 0.711 $ 8 $ 50,000 0.677 $ 9 $ 50,000 0.645$ 10 $ 50,000 0.614 $ 11 $ 50,000 0.585$ 12 $ 50,000 0.557 13 $ 50,000 0.530 $ 14 $ 50,000 0.505 15 $ 50,000 0.481 $ 16 $ 50,000 0.458 $ 17 $ 50,000 0.436 $ 18 $ 50,000 0.416 $ 19 $ 50,000 0.396 $ 20 $ 50,000 0.377 $ 21 $ 50,000 0.359 $ 22 $ 50,000 0.342 $ 23 $ 50,000 0.326 $ 24 $ 50,000 0.310$ 25 $ 50,000 0.295 $ 26 $ 25,000 0.281 $ 27 $ 25,000 0.268 $ 28 $ 25,000 0.255$ 29 $ 25,000 0.243 $ 30 $ 25,000 0.231 $ 31 $ 25,000 0.220 $ 32 $ 25,000 0.210 $ 33 $ 25,000 0.200 $ 34 $ 25,000 0.190 $ 35 $ 25,000 0.181 $ 36 $ 25,000 0.173 $ 37 $ 25,000 0.164 S 47,619 45,351 43,192 41,135 39,176 37,311 35,534 33,842 32,230 30,696 29,234 27,842 26,516 25,253 24,051 22,906 21,815 20,776 19,787 18,844 17,947 17,092 16,279 15,503 14,765 7,031 6,696 6,377 6,074 5,784 5,509 5,247 4,997 4,759 4,532 4,316 4,111 Present value $ 770,131

*Please rate thumbs up