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Ambrin Corp. expects to receive $2,000 at the end of each year for 10 years. Then the corporation expects to receive $3,500 per year for the following 10 years, at the end of each year. What is the approximate present value of this 20-year cash flow? Use an 8% discount rate.

(A) $2.547
(B) $24,294
(C) $27,870
(D) $32,389

Respuesta :

Karabo99

Answer:

B) $24294

Explanation:

PVIFA = (1 - (1 + r)^-n)/r

          = (1 - (1 + 8%)^-10)/8%

          = 6.710

PVIF = 0.4632

present value = (amount expected to receive for the first 10 years)×(PVIFA) + (amount expected to receive for the second 10 years)×(PVIFA)×(PVIF)

                        = (2000)×(6.710) + (3500)×(6.710)×(0.463)

                        = $24293.6

                        ≈ $ 24294

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